Regional officials fear that the reluctance of western and multilateral creditors to provide direct financial support could lead to the collapse of the fragile power-sharing deal they brokered between Robert Mugabe, president, and Morgan Tsvangirai, his opposition rival and now prime minister.
As an interim measure Zimbabwe’s neighbours, led by Botswana and South Africa, are stepping in with financing to revive the country’s ailing private sector.
Elton Mangoma, Zimbabwe’s minister for economic planning and investment promotion, told the Financial Times that the government was targeting $1bn (€753m, £671m) in credit lines from Africa.
Tendai Biti, finance minister, said last week in London that he has raised $400m of this so far.
Nonetheless, without direct support the government will fall hundreds of millions of dollars short of financing this year’s budget.
Neither Britain nor the US have been enthusiastic about prospects of the power-sharing government halting Zimbabwe’s vertiginous collapse, which they blame on Mr Mugabe.
They want to see evidence that the opposition camp in government is gaining ascendancy over the ageing autocrat and is able to drive through reforms before international financial institutions and bilateral donors commit direct budgetary support.
Mr Tsvangirai pleaded with unions at the weekend not to carry out a threatened strike, saying the government was broke and unable for now to raise a civil servant allowance from $100 a month.
“Tsvangirai himself has been saying to the masses who he leads, that [the deal] is working – give us a chance,” Mathews Phosa, treasurer-general of South Africa’s ruling African National Congress, and a close ally of Jacob Zuma, incoming South African president, told the FT.
“So what is the responsible policy? It should be to support him … and not just with nice sounding words,” he said, adding: “If the MDC feels isolated in the effort that [finance minister] Biti is pushing then the whole thing is going to collapse.”
But he said that South Africa, which is finalising about $30m in trade finance according to a government official, was not prepared to shoulder the burden of financing on its own.
Botswana was also offering loan guarantees for its own banks worth up to $70m to fund “opportunities” in Zimbabwe, a government spokesman said.
The Eastern and Southern African Trade and Development Bank, the finance arm of the regional common market, is providing about $50m.
Further afield, Afreximbank, set up to promote intra-African trade, is hoping to tap Zimbabwe’s large diaspora to fund a bond and is already rolling more than $250m in trade credits annually to finance oil and grain imports, and tobacco, gold and cotton exports.
But as well as satisfying British and US expectations, the Zimbabwe government must also address $3.8bn arrears on existing $6bn debt before accessing fresh credits from multilateral lenders.
An IMF delegation that visited Zimbabwe in March wrote in a report to the fund’s directors, a copy of which was obtained by the FT: “For real GDP growth to turn positive in 2009, in addition to sound policies … official budget support of at least US$200m [6 per cent of GDP] would need to be mobilised.”
Humanitarian assistance in the areas of food relief, health and education might need to increase by up to $300m this year, it said.
Originally published in the The Financial Times Limited