THE European Union (EU) has ruled out prospects of
providing budgetary support to the broke Zimbabwean government, citing “massive
misuse” of public funds as exposed by various audits and the failure to ensure
transparency and predictability.
Failure to implement substantive economic and political
reforms is also a major concern to the EU.Finance minister Mthuli Ncube last
month made an impassioned plea to international financial institutions for
support which includes debt rescheduling or cancellation.
In his letter, which was leaked to the media, the Treasury
chief painted a grim picture of the country’s economic crisis. He pointed out
that the economy would contract by between 15% and 20% this year, adding that
the advent of the Covid-19 pandemic, which has claimed hundreds of thousands of
lives globally, will spawn a national catastrophe with potentially devastating
consequences for the rest of southern Africa.
In an wide-ranging interview with the
Zimbabwe Independent this week, the EU’s ambassador to Zimbabwe,
Timo Olkkonen, said assisting this country with budgetary support is not under
consideration.
“At the moment, budget support is not on the table.
Currently, we are not in the clear what is happening with government revenue
and expenditure. The Auditor-General’s report shows massive misuse of public
funds. That is not a fiscal environment where I would be willing to see
European taxpayers’ money go,” Olkkonen said.
“The EU has been supporting the government in public
financial management through the World Bank-managed ZIMREF (Zimbabwe
Reconstruction Fund), but there is still much more to be done to create
transparency and predictability.”
Olkkonen pointed out that Zimbabwe has been added by the
Financial Action Task Force (FATF) to a list of countries that are risky in
terms of money laundering and terrorism financing because the country has
failed to fulfil certain recommendations within a set timeframe.
FATF is an inter-governmental organisation founded in 1989
as an initiative of the Group of Seven (seven of the largest economies in the
world) to develop policies to combat money laundering.
According to FATF, Zimbabwe’s deficiencies include:
insufficient understanding of the key money laundering and terrorist financing
risks. The country is also deficient in the implementation of anti-money
laundering and counter-terrorist financing policy based on the identified
risks. There are further shortcomings in the implementation of risk-based supervision
of financial institutions and designated non-financial businesses and
professions (DNFBPs).
“Lack of adequate risk mitigation measures among financial
institutions and DNFBPs entailing the application of proportionate and
dissuasive sanctions to breaches; shortcomings in the legal framework and
mechanism to collect and maintain accurate and updated beneficial ownership
information for legal persons and arrangements, and to ensure timely access by
the competent authorities,” the FATF notes in its report.
“Gaps in the framework and implementation of targeted
financial sanctions related to terrorist financing and proliferation financing.
On this basis, Zimbabwe should be considered as a country having strategic
deficiencies … under Article 9 of directive (EU) 2015/849”.
Olkkonen said the European Commission’s decision to list
Zimbabwe among countries that are not serious about fighting money laundering
is the EU’s way of implementing the FATF ruling.
“The FATF decision itself was taken as a consequence of a
process with Zimbabwe, where the country was given a set of recommendations
that were not fulfilled in the given timeframe,” Olkkonen said.
“The European Commission decision means that European banks
need to exercise enhanced due diligence when processing financial transactions
to and from Zimbabwe. The listing will be active from 1 October onwards, as it
was deemed appropriate to delay it because of the corona pandemic.”He said
Harare’s implementation of the recommendations it agreed with FATF will go a long
way in having the country removed from the list.
“The EU has resources to support countries to implement the
required actions and Zimbabwe could make a request for that support,” Olkkonen
said.
The EU ambassador to Zimbabwe said the country does not qualify
for the debt-service moratorium for developing countries because of its failure
to service its debts to international financial institutions (IFIs) and
bilateral creditors.
“Zimbabwe owes significant debts to several EU member
states bilaterally, and member states are shareholders and represented on the
boards of the IFIs, including that of the European Investment Bank. In general,
the European Commission has announced its support for a debt service moratorium
for developing countries struggling with the response to Covid-19,” Olkkonen
said.
“A moratorium of payments would not be applicable to
Zimbabwe, since the country unilaterally stopped servicing its debts to most
IFIs and bilateral creditors years ago.”
He said reforms are imperative if the country is to
normalise relations with IFIs.“The IMF Staff-Monitored Programme was seen as a
starting point for creating macro-economic balance, and there is still a hope
that serious economic reforms would pave a way towards closer engagement with
IFIs, which could also be a stepping stone towards addressing the debt issue,”
Olkkonen pointed out. “In addition to purely macro-economic measures,
governance and addressing the leakages in the economy would be crucial.”
Zimbabwe Independent
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