PRESIDENT Emmerson Mnangagwa has denied approaching his
Chinese counterpart Xi Jinping asking for a US$2 billion bailout package on the
sidelines of the Forum on China-Africa Co-operation (Focac) in Beijing last
September.
This follows reports that he had tabled a request for the
critically needed bailout package in a desperate bid to ease the country’s
crippling liquidity crisis because the Chinese government had insisted that
Zimbabwe clear its arrears with the world’s second largest economy.
For some time, Harare has for some time 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.
Mnangagwa also denied his government had turned to
neighbouring South Africa for an alternative source of funding to the tune of
US$1,2 billion.
What government was looking for, he said, were investments
as well as lines of credit, and not a bailout package.
Bailout is a general term for extending financial support
to a country or company facing a potential bankruptcy threat. It can take the
form of loans, cash, bonds, or stock purchases. A bailout may or may not
require reimbursement and is often accompanied by greater government oversee
and regulations.
The government or the financing body places strict requirements
such as restructuring of the organisation, change of management and in some
cases a cap on salaries of executives until a stipulated time period or the
repayment of dues. This may also be followed by a temporary relaxation of rules
that may impact the accounts of the rescued country or entity.
“I have never asked for a bailout package. I read it in the
newspapers. We want investments, not a bailout package. We need investments
where it is a win-win situation. Investors come and put their money and make
profits while we have development in the country. So we never asked for a
bailout package,” Mnangagwa said during an interview with journalists from the
private press at State House in Harare on Wednesday night.
“So we never asked for a bailout package from China, but we
sought investments and we have succeeded in that regard,” he said.
He was hopeful for a line of credit from South Africa. “We started engaging South Africa earlier this year when we
had the cooking oil shortage. We have the Nepad (New Partnership for Africa’s
Development) fund which is structured to assist member states who find
themselves having problems and it is administered by South Africa. So you can
apply to the fund there for a line of credit to be advanced to you and you will
pay back later. You can apply to that fund to be assisted to deal with the
challenges you are facing. That fund has been put there for that purpose. So it
is on those bases that we contacted South Africa,” Mnangagwa said.
He said they realised during the negotiations for Nepad
funds that it would take a long time before the funds can be disbursed so they
asked for South Africa’s assistance instead.
“With regards to the Nepad fund, South Africa has no final
say. It has to go to a committee which will look at it and it would take a lot
of time. Then because of the nature of relations between us and South Africa,
we said to South Africa can you give us lines of credit. So this is why
discussions between the South African minister of finance, our own finance
minister (Professor Mthuli Ncube) and the governor of Reserve Bank of Zimbabwe
started,” Mnangagwa said.
“Talks are therefore underway for a line of credit from
South Africa. Botswana has also given us a line of credit worth 70 million pula
(US$6,7 million).
What it means is that Zimbabwean businesses can get goods
from those two countries worth that amount. We are then given a grace period
and then we could be able to repay the credit within an agreed period of time,
say two or five years. It is different from a bailout package in that it does
not come with certain conditions attached to it,” Mnangagwa said.
Zimbabwe is currently struggling to clinch bilateral
lending agreements because of its high level of indebtedness.
Zimbabwe’s external debt currently stands at US$7,5 billion
and leading creditor nations and international financial institutions insist
the country can only access fresh funding if it clears its arrears. Zimbabwe
Independent
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