Chinamasa wins unlikely praise as he seeks re-engagement with global capital

HARARE,– 2015 could be aptly described as the year of the lion in Zimbabwe.

By Nelson Banya
chinamasa
After all, a lion that not many locals knew even existed but had a huge foreign fan base brought the country its greatest global attention during the year. Some feat, given Zimbabwe’s penchant for hogging the spotlight for its economic and political crises.

Less spectacularly, Zimbabwe’s finance minister Patrick Chinamasa spent much of the year seeking to carve a more enduring mark on the country’s economic landscape.

Chinamasa (68), whose moniker is Shumba (lion) after his totem, was not as lionized as was Cecil during the year, but he will be credited for perhaps Zimbabwe’s most significant economic event of 2015. Lima, Peru.

In October, leading international finance institutions, the African Development Bank, World Bank and the International Monetary Fund approved Zimbabwe’s plan to clear $1,8 billion in arrears by April, 2016.

This is not only significant in that Zimbabwe has finally come around to clearing arrears it has wished away, with the obstinacy of a wayward juvenile, since the late 1990s. Perhaps even more significant is that, according to the IMF, this move could see Zimbabwe accessing fresh funds, something it badly needs but hasn’t been able to do for nearly two decades.

Bad start

But the year did not start auspiciously for Chinamasa. At the end of a quarter in which a weary Treasury had to scrounge to pay civil servants’ bonuses and wages, a $165 million carryover from 2014, the finance minister announced the suspension of bonus entitlements, at least until 2017.

Zimbabwe’s government pay roll consumes about 80 percent of the annual budget. Clearly an unsustainable situation for a country that badly needs capital investment to grow its stuttering economy.




But within days the finance minister was publicly slapped down by President Robert Mugabe, who called the decision ‘disgusting,’ adding that the presidency had not been consulted. It didn’t matter that Cabinet HAD discussed and approved the measures, Chinamasa had to climb down and apologise for his ‘mistake.’

Chinamasa’s humiliation was compounded by the fact that Mugabe’s rebuke coincided with the finance minister’s visit to Washington for the World Bank/IMF spring meetings. Ahead of the meetings, Chinamasa had fired off a letter of intent to the IMF, detailing fiscal reforms, including cutting the government wage bill.

Although Chinamasa lost the bonus battle, he is determined not to lose the wage war. His 2016 budget proposes to shave $170 million off the annual government wage bill through the reduction of ward staffing levels for the youth and women’s ministries as well as agricultural extension workers.

He also proposes to stop paying salaries for teachers employed by private schools, cancel allowances for student teachers and review the vacation leave policy for the education sector.

IMF nod

While Zimbabwe’s economic situation remains parlous, thanks in no small part to policies detrimental to foreign investment, weak global commodity prices and the poor performance of its anchor agriculture sector, Chinamasa and his team at Treasury have been commended by the IMF for staying the reform course under the IMF staff monitored programme (SMP).

The SMP is an informal agreement between a government and the Fund staff to monitor the implementation of economic reforms. Although it does not entail automatic funding, the SMP is important in establishing a track record of economic management that could signal to multilateral lenders and private investors that a state can be trusted with loans and investment.

Ahead of the Lima meeting in October, the IMF issued a statement commending the Zimbabwe government for its “strong commitment” to reforms under the SMP.

Further advancing reforms and re-engaging with the international community could reopen Zimbabwe’s access to financial support, the IMF has said.

The IMF has indicated that the successful implementation of the arrears clearance plan could open the door to fresh funding as early as 2016, which would be a real coup, considering that Zimbabwe’s relations with global lenders appeared irretrievably broken down just a few years ago.

Bravery and pragmatism

It has taken bravery and pragmatism on both sides for this remarkable turn-around. The IFIs have been pragmatic in their recent engagements with Harare, possibly with an eye on various post-Mugabe scenarios.

But it has also required bravery on the part of the head of Treasury, Chinamasa, to shepherd the re-engagement drive in the face of overt opposition from his Cabinet colleagues and lukewarm support from Mugabe, who has previously called the IMF “the devil.”

Chinamasa was even branded an IMF spokesperson by an indignant Cabinet colleague for his re-engagement fervor.

Not one to back out of a fight, even though he has remarkably shirked the belligerence that marked his tenure as justice minister, Chinamasa has persisted in spite of that internal criticism.

A battle-hardened political negotiator – Chinamasa has been ZANU-PF and Mugabe’s trusted negotiator in inter-party talks with the opposition since 2002 – the finance minister deftly sought and secured the public support of the ruling party’s politburo days after returning from Lima.

This, observers have said, was meant for his external interlocutors – IMF, World Bank and AfDB – more than his internal critics.

An emboldened Chinamasa was to once again forcefully champion re-engagement at last week’s ZANU-PF annual conference, telling delegates who included Mugabe:

“We must be friends to everyone and enemies to no one.”

After all, the United Kingdom ($97,4 million), the United States ($64,5 million) and the European Union ($38,2 million) accounted for nearly 70 percent of the $287 million bi-lateral aid Zimbabwe received between January and September 2015, according to Treasury data.

Brickbats to plaudits

Chinamasa was widely considered an underwhelming choice as finance minister upon his appointment in September 2013. He came in at a time when Zimbabwe’s post-dollarisation economic bounce was in peril. Commodity prices had softened considerably amid negative sentiment about a post-power sharing ZANU-PF’s government’s management of the economy.

Chinamasa’s well earned reputation as a combative operator and his bellicose demeanor boded ill for re-engagement with Zimbabwe’s estranged former funders, the reasoning went. As justice minister, Chinamasa had actively overseen the ouster of several white judges seen as hostile to Mugabe’s government and its land seizure drive.

After the 2008 election, Chinamasa had emerged as head of ZANU-PF’s information and publicity sub-committee, a position which saw him acting as party spokesman at a time when the embattled ruling party, which had just lost its parliamentary majority and the first round of the presidential election, was at its most combative.

The former attorney general, who obtained his law degree from the University of London in 1971, has however, confounded even his staunchest critics with his assured stewardship at Treasury.

Routinely named by the opposition and the private press among hardliners in Mugabe’s party, particularly during the tempestuous four years when ZANU-PF shared power with the opposition, Chinamasa has earned a reformist tag from some of the most unlikely sources.

Influential British academic Stephen Chan has called Chinamasa a “moderate”, while The Economist branded him a “relative reformist” who needs to be encouraged to stay the course of reforms.

Chinamasa has also won over some of his early domestic critics. A member of the Zimbabwe Stock Exchange committee, which had an acrimonious relationship with Chinamasa’s predecessor Tendai Biti over the bourse’s demutualisation, expressed pleasant surprise at how “even-handed and reasonable” the current Treasury chief was.

“Quite a few of us have been proved wrong. He could be one of the best finance ministers we have had, even though that does not say much given some uninspiring appointments that have been made there,” the ZSE committee member, who requested anonymity, said.

Big moves

Chinamasa is no newcomer to the finance ministry. Nor to big decisions with far-reaching consequences.

He was acting minister during the interregnum between the disputed 2008 election and the formation of the unity government in February 2009.

On January 29, 2009, Chinamasa laboured through a budget speech littered with quadrillions and quintillions of Zimbabwe dollars, ending it all with an announcement that multiple foreign currencies would now be legal tender in the country, effectively dollarizing the economy.

He also terminated price controls, which had been in effect since June 2007 and had hastened Zimbabwe’s economic spiral.

Criticism

While Chinamasa has been commended for his commitment to reforms and re-engagement drive, his 2016 national budget statement drew some considerable criticism over its allocation of funds.

Chinamasa’s allocation of almost 20 percent of the $4 billion 2016 budget to security ministries drew some condemnation from the opposition and economic analysts.

Treasury’s inability to contain government spending, especially on foreign travel remains a blemish on Chinamasa’s record.

Critics of Chinamasa and the Mugabe government insist more needs to be done to rein in government spending, root out corruption and promote foreign direct investment.

The long-promised reform of state-owned enterprises, possibly privatising most of them, remains an area of underperformance, despite Chinamasa’s repeated undertakings to act on them.

Prospects

While targeting 2.7 percent GDP growth in 2016, which he says would be anchored on mining, tourism, construction and the financial sector, Chinamasa said Zimbabwe’s long-term growth prospects hinge on efforts to re-engage the country’s traditional western funders.

In this regard, the arrears clearance programme is a crucial step.

Chinamasa hopes the successful execution of the arrears clearance strategy will pave way for a New Comprehensive Country Financing programme, supported by the World Bank, IMF and AfDB.

This new funding programme, which will entail direct developmental budget support, could also have the added spin-off of credit lines for Zimbabwe’s cash-starved private sector from the private sector lending arms of the World Bank and AfDB. – This article was first published by The Source 

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