Britain prepares £1bn-a-year package to aid Zimbabwe

from ZW News


Focus on reducing inflation and steadying the exchange rate

Patrick Wintour, political editor

Britain is working on an unprecedented £1bn-a-year international emergency aid and development package to rescue the ruined Zimbabwean economy. The scale of the programme - nearly triple the aid presently going to Zimbabwe - means it will be coordinated by the International Monetary Fund, World Bank, European Union and United Nations. It will be discussed at the IMF spring meeting on April 12 and 13 in Washington, at an EU general affairs council later in the month, and possibly at the margins of the Nato summit in Bucharest. The IMF prepared a rescue package for the Zimbabwean economy nine years ago, but it was rejected by Robert Mugabe. British officials are looking to see how it will need to be updated. A separate aid package was drawn up in 2007 by the Southern African Development Community, but that too was rejected because of the conditions attached. Mugabe has instead been looking for loans from Iran, China and Libya to finance his massive deficits.

Models examined by the Department for International Development suggest that if the currency can be corrected, it will be possible for the economy to be turned around relatively quickly. IMF work suggests hyperinflation can be brought under control in a year, allowing output to rise relatively rapidly. Price and exchange rate liberalisation is seen as a condition of progress by the IMF. But British government sources said the £1bn-a-year package, possibly assembled at a donor conference, might need to last many years. Britain, the former colonial power, is anxious not to be seen at the helm of the aid package, and is stressing that the initiative will eventually be an international one. Any attempt to be seen to be bribing the Zimbabwean people to reject Mugabe is likely to be used as a propaganda tool by Zanu PF, requiring Britain to walk a tightrope.

Britain currently provides £40m a year, largely through the UN, and is likely to double its aid package fairly quickly. But the international development secretary, Douglas Alexander, has been kept informed of the programmes being developed, and has also asked for an emergency humanitarian package to be prepared in the event of riots or violence breaking out in protest at Zanu PF failing to accept the result of the election. The foreign secretary, David Miliband, said contingency plans were also under way in the event of a doomsday scenario to help the 10,000 former British nationals living in the country. Officials said the task of righting the Zimbabwean economy will be complicated by the 4 million exiles, including many professionals living abroad, since it is hard to know how quickly they will be willing to return, and if they did return quickly whether they would overwhelm the rudimentary public services.

Apart from focusing on reducing inflation, and steadying the exchange rate and balance of payments, the package will be directed at basic health and education services, infrastructure and justice. The bulk of British aid currently goes on HIV and Aids. Miliband said: "The rehabilitation will be on a scale not seen by almost any country for a long time". It is thought the Zimbabwean economy has shrunk by more than a third since 1999, a decline worse than in major African civil wars. Nearly 80% of the population live below the poverty line and inflation is running officially at 100,586%. DfID points out economic collapse has meant that 80% of the population are without jobs and almost 60% are living on less than 50p a day. A baby girl born in Zimbabwe today has a life expectancy of 34, the lowest in the world. The economic crisis is largely blamed on the seizure of white-owned commercial farms that began in 2000, disrupting the agriculture-based economy. Commercial production of maize has dropped 86% between 2000 and 2005. An agreement on land tenure and property rights is seen by DfID officials as one of the biggest long term problems facing the agricultural sector.