China has written off “substantial” interest free loans borrowed by Zimbabwe during the late former president Robert Mugabe’s final years in power, giving relief to a country that the International Monetary Fund (IMF) says is in ‘debt distress’.
Zimbabwe currently owes a combined US$17,5 billion to
foreign and local creditors.
Of this amount, about US$14 billion is owed to foreign
creditors.
As a result of the debts, Zimbabwe has been shut out of
international financial markets.
Multilateral creditors, including the World Bank and the
African Development Bank (AfDB), suspended extending loans to Zimbabwe in 2001
when the country started defaulting.
Mugabe left Zimbabwe saddled with a massive debt when he
was toppled through a “military-assisted transition” that propelled President
Emmerson Mnangagwa to the helm in 2017.
With Zimbabwe’s external debt standing at about US$14
billion, debts owed to China translate to about US$2,1 billion.
The bulk of the cancelled loans were availed by China’s
Export and Import Bank (Eximbank).
Former Finance minister Patrick Chinamasa, who presided
over the Treasury when the loans matured, did not respond to the Independent’s
questions.
This publication sought to understand the exact value of
loans and how Zimbabwe benefited from China’s gesture of goodwill.
In 2015, when the cancellations were made, Chinamasa
presented a US$4,1 billion budget.
Out of this, US$3,32 billion was gobbled by the public
service wage bill, while US$798 million was channelled towards operations, debt
servicing and development projects.
A severe drought and acute liquidity crisis forced
Chinamasa at the time to trim economic growth projections from 3,2% to 1,5% in
2015.
On August 24, 2022, Finance minister Mthuli Ncube told
Parliament that Zimbabwe had borrowed US$2,7 billion from China since
Independence in 1980.
Some of the loans were settled.
The Treasury boss said at the time: “Since 1980, Zimbabwe
has contracted loans from China amounting to approximately US$2,7 billion.
“Out of the loans that I have mentioned, US$152 million
worth of loans have since matured and are fully paid up. The outstanding debt
to China as at August 2022 amounts to US$1,768 billion.”
During that same address, Ncube disclosed that Zimbabwe had
collateralised 26 million ounces of platinum in exchange for a US$200 million
loan to finance the agriculture mechanisation programme in 2006.
Zhou added that Beijing was willing to assist Zimbabwe
address its odious debt question after the US pulled out of the AfDB-led
initiative to resolve Harare’s debt crisis this year.
Subsequently, the US replaced its Executive Orders embargo
imposed against Zimbabwe in 2003 with the Global Magnitsky sanctions framework.
Under the fresh sanctions, Mnangagwa and 11 other
individuals consisting of his wife Auxilia and top lieutenants were designated.
The sanctions include asset freezes and travel bans.
“China would like to enhance communication with the
Zimbabwe government to work out proper settlements through friendly
consultation,” Zhou added.
“China will continue to support Zimbabwe’s economic and
social development based on its needs.
“China will continue to communicate with the Zimbabwean
government on financial assistance of infrastructure and livelihood projects to
enhance Zimbabwe’s capacity for self-generated and sustainable development and
deliver tangible benefits to its people.”
Sources close to debt settlement negotiations between
Harare and Beijing told this publication that Ncube travelled to China in
October.
In China, he met officials from Eximbank.
The sources in multiple briefings, added that deliberations
focused on Harare’s plea for debt rescheduling. Debt rescheduling refers to
restructuring loans through reducing payment amounts by extending payment
periods.
It can also be done by increasing the number of payments.
“Finance minister Ncube travelled to China in October where
he met with top officials from China’s Eximbank and other top officials from
China’s ministry of Finance,” a top government source said.
“Discussions among parties centred on exploring flexible
ways that can be pursued for Zimbabwe to settle its debt obligations. China is
confident that Zimbabwe will honour its obligations.”
Questions posed to Ncube seeking understanding on how his
discussions with Eximbank unfolded were not addressed.
Some of the loans that Zimbabwe has borrowed from China in
recent times include US$152,8 million for upgrading the Robert Gabriel Mugabe
International Airport, US$997,7 million for expanding the Hwange 7 and 8 units,
US$98,7 million for the construction of National Defence College and a US$149,9
million facility for Victoria Falls International Airport expansion.
In a 2006 paper titled: “China Eximbank and Africa: New
Lending, New Challenges,” the Center for Global Development headquartered in Washington contended that
the bank had become an alternative source of credit for nations isolated by the
West.
“The rise of the China Exim is a potentially important
trend for African development by providing a new source of capital, especially
for much-needed infrastructure investment,” the paper reads.
“For pariah regimes like Sudan or Zimbabwe, these credits
can be a lifeline.” Zimbabwe Independent
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