Donors line up R25bn lifeboat

JOHANNESBURG – Development economists in New York, Washington and other Western capitals are hurrying to put the final touches to a multibillion-rand economic rescue plan for Zimbabwe after Thursday's historic power-sharing deal.

More than R25-billion could be pumped into Zimbabwe to try to stabilise the economy by controlling runaway inflation (between 30- and 50-million percent) and the spiralling exchange rate.

But the rescue will require massive discipline from the Zimbabwean government and its people. It will entail drastic cuts in government spending at the same time as prices, interest rates, the exchange rate, exchange control and markets are liberalised after decades of tight control by Mugabe, economists say.

And because they are not sure the new unity government will be up for such serious belt-tightening, donor nations and international financial institutions, such as the International Monetary Fund and World Bank, say they will "sit on the fence" for a while, as one ambassador in Pretoria put it, until they see what the government actually does.

Though power will be shared between Mugabe, remaining as president, and the main MDC leader Morgan Tsvangirai, as prime minister, it is not yet clear how it will be shared. President Thabo Mbeki, the talks mediator, said the details will be published on Monday.

He urged donors to support the new government, saying it was the product of Zimbabweans themselves.

But donors fear that if too much power is left in Mugabe’s hands, he will continue to wreck the economy, as he has done for the past eight years and more.

"As long as there is no proof that Mugabe does not still have real power, we will not activate any rescue package," said one ambassador in Pretoria yesterday.

However, others acknowledge that the deal presents them with a dilemma. Though they are reluctant to do anything that looks like giving money to Mugabe – not least because their taxpayers might protest – they also know that it will be hard to second-guess the MDC by denying aid to a government in which Tsvangirai is prime minister.

Some donors will start off by funnelling money directly to basic services like food, water and sanitation "so that if it goes pear-shaped, no one can say we were giving taxpayers’ money to Mugabe", one diplomat said.

"We’re in a catch-22 here," said another ambassador.

"Donors are reluctant to give money until they see the new government working. But the new government will probably not work unless it gets foreign assistance."

It is understood that the rescue package is being co-ordinated by the IMF – which will play the key role in stabilising the currency and inflation – the World Bank, the European Union and the United Nations.

The EU and Britain have lined up the largest share of the package, followed by the US.