PRESIDENT Emmerson Mnangagwa’s quest for a critical US$2
billion bailout package from China in a desperate bid to ease the country’s
crippling liquidity crisis has hit a brick wall although the Chinese kept doors
of negotiation open and pledged to continue funding infrastructural projects.
The failure has come as a body blow to Mnangagwa, who has
promised to turn around Zimbabwe’s troubled economy, which is hamstrung by a
liquidity crisis and foreign currency shortage as well as low investor
confidence, among other challenges.
Harare has for some time also been engaging British
multinational bank Standard Chartered Plc and other institutions to help raise
US$1,8 billion to clear arrears to multi-lateral institutions under the Lima
Plan, to enable the country to secure US$2 billion in fresh funding.
This followed the presentation of an arrears clearance plan
to its creditors in Lima, Peru, in 2015, which was anchored on several
financial sector and structural reforms, that have largely not been
implemented.
Mnangagwa arrived in Harare yesterday morning after
attending the summit of the Forum on China-Africa Co-operation (Focac) in
Beijing. He held a bilateral meeting with Chinese President Xi Jinping on
Wednesday, where he sought support to ease the liquidity crisis in the country.
He was accompanied by several officials, including outgoing
Finance minister Patrick Chinamasa and Reserve Bank of Zimbabwe governor John
Mangudya, who held meetings with officials from China’s financial sector, as
part of a push to secure critical credit lines.
Speaking to the state media from China this week Chinamasa
said: “We are looking at US$2,5 billion lines of credit to support the entirety
of the productive sectors, tourism, mining, industry, agriculture and
manufacturing, among others.”
Mangudya said: “Zimbabwe’s economic development hinges on
the access to capital and in that vein we are excited that the US$60 billion
package announced by President Xi Jinping is going to be accessible to African
countries. We as Zimbabwe we are taking this matter seriously and engage with
other financial institutions here and see how best we can make the economy
improve through such lines of credit.”
Ministry of Finance and RBZ officials have for some time
been negotiating for a loan from the Industrial and Commercial Bank of China
(ICBC) and the Export-Import Bank of China, but a breakthrough has been slow in
coming because the Chinese remain worried about Harare’s ability to repay
loans.
The Zimbabwe Independent understands the major bottleneck
this time around was the failure by Zimbabwean officials to demonstrate
capacity and willingness to settle arrears from previous loans.
Officials said Zimbabwe has arrears of about US$300 million
from previous Chinese loans.
“In financial cooperation, confidence is very important. At
the moment China’s financial institutions might not have enough confidence in
RBZ and Ministry of Finance officials. Zimbabwe owes China Eximbank and
Sinosure, and one thing for sure is that if you want more lines of credit, you
must pay back arrears or show commitment to pay,” an official close to the
negotiations said.
“The arrears are not very much. They are less than US$300
million. It’s possible that if you pay that, you get much, much more. You also
don’t have to settle the whole amount; you can make a payment plan of, say,
US$10 million a month or a little amount. You can also talk about debt
restructuring or ask for a grace period to repay the loans. But if you just
stop paying and expect to get a bigger loan it becomes difficult.”
A Chinese embassy official told the Independent the Focac
summit was a success for China and African countries, including Zimbabwe.
He expressed optimism that a solution will eventually be
found to assist Zimbabwe to address its liquidity challenges.
“It (US$2 billion loan) still needs more time and
discussions. It’s not something that can be finalised in one visit. A lot of
work has to be done to persuade the Chinese and this requires innovation and
proper planning. One of the top Chinese leaders once said ‘whenever you find
any problem that can’t be solved, it doesn’t mean that there are no solutions;
it means that you have not done enough investigative work’. There is need for
more innovation, ” the Chinese official said.
The official said Zimbabwe, in theory, stood to benefit
from the US$60 billion availed by Xi for China-Africa cooperation between 2018
and 2021. He said Zimbabwe would also benefit from the eight major initiatives
with African countries announced by Xi for the next three years. These cover
fields such as industrial promotion, infrastructure connectivity, trade
facilitation, and green development.
The US$60 billion will comprise US$15 billion in aid,
interest-free loans and concessional loans, a credit line of US$20 billion, a
US$10 billion special fund for China-Africa development, and a US$5 billion
special fund for imports from Africa.
Xi encouraged Chinese companies to invest at least US$10
billion on the continent in the next three years.
“We expect Zimbabwe to benefit from this US$60 billion, for
example as part of measures to promote imports China will host the
International Import Expo in Shanghai. We are encouraging those with quality
products to exhibit at the expo, so that their products can be imported to
China,” he said. “China will continue providing funding and implementing
infrastructure development projects. We are looking at Kunzwi Dam, Batoka Power
Project and possibly the North-South Road) Chirundu-Beitbridge highway as possible
areas of co-operation.
“Zimbabwe and China also signed a memorandum of
understanding for cooperation under the Belt Road Initiative, which means
Zimbabwe has opened new sources of funding for projects.”
The official said for Zimbabwe to benefit from the US$60
billion facility it was important for government and embassy officials to
assist each other to craft bankable and feasible project proposals.
On his last visit, Mnangagwa managed to secure project
funding for the refurbishment of Hwange Power Station’s units 7 and 8, as well
as the Robert Mugabe International Airport.
The initial agreement for the Hwange Power Station deal was
signed in August 2014 when former president Robert Mugabe visited the world’s
second largest economy.
China agreed to extend loans to Zimbabwe, amounting to over
US$1,1 billion for the expansion of the power station.
However, insurance firm Sinosure refused to guarantee loans
from Chinese banks to Zimbabwean companies including a loan meant for the
expansion of the power station because of the government’s failure to repay
arrears already owed to China.
The impasse has persisted because Zimbabwe still owes
US$160 million to China Exim Bank and Sinosure.
Special agreements were however made on the Hwange thermal
project and the Robert Mugabe International Airport, and the Victoria Falls
International Airport in line with the elevation of relations.
China also extended a US$500 million loan for the Kariba
South Extension programme while work on the construction of a new parliament in
Mt Hampden near Harare will commence soon. Zimbabwe Independent
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