China has canceled “substantial” interest-free loans borrowed by Zimbabwe during former President Robert Mugabe’s final years in power, relieving the country that the International Monetary Fund says is in “debt distress.”
Zimbabwe currently owes a total of 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 these debts, Zimbabwe has been excluded from international financial markets.
Multilateral creditors, including the World Bank and the African Development Bank, suspended loans to Zimbabwe in 2001 when the country began to default.
Mugabe left Zimbabwe with massive debts when he was ousted through a “military-assisted transition” that brought President Emmerson Mnangagwa to power in 2017.
With Zimbabwe’s external debt at about US$14 billion, the debt owed to China translates to about US$2.1 billion.
The bulk of the canceled loans were availed by the Export-Import Bank of China (Eximbank).
Former Finance Minister Patrick Chinamasa, who headed the Treasury when the loans came due, did not respond to The Independent’s questions.
This publication sought to understand the exact value of the loans and how Zimbabwe benefited from China’s goodwill gesture.
In 2015, when it was cancelled, Chinamasa presented a budget of US$4.1 billion.
Of this amount, the public service wage bill accounted for US$3.32 billion, while US$798 million was directed towards operations, debt service and development projects.
Severe drought and a severe liquidity crisis at the time forced Chinamasa to cut its economic growth forecast from 3.2% to 1.5% in 2015.
On 24 August 2022, Finance Minister Mthuli Ncube told Parliament that Zimbabwe had borrowed US$2.7 billion from China since independence in 1980.
Some loans have been settled.
“Since 1980, Zimbabwe has contracted loans from China amounting to approximately US$2.7 billion,” the Treasury chief said at the time.
“Among the loans I mentioned, loans worth US$152 million have since matured and been repaid in full. The debt owed to China as of August 2022 is US$1,768 billion.
During the same speech, Ncube revealed that Zimbabwe had secured 26 million ounces of platinum in exchange for a US$200 million loan to finance an agricultural mechanization program in 2006.
Zhou added that Beijing is ready to help Zimbabwe address the issue of its abhorrent debt after the United States withdrew from the African Development Bank-led initiative to resolve the Harare debt crisis this year.
The United States later replaced its embargo on Zimbabwe under executive orders in 2003 with the Global Magnitsky sanctions framework.
Under the new sanctions, Mnangagwa and 11 other individuals were designated, including his wife Auxilia and his top aides.
Sanctions include asset freezes and travel bans.
“China is willing to strengthen communication with the Zimbabwean government to reach appropriate settlements through friendly consultations,” Zhou added.
He added that China will continue to support Zimbabwe’s economic and social development based on its needs.
“China will continue to engage with the Government of Zimbabwe on financial assistance for infrastructure and livelihood projects to enhance Zimbabwe’s ability to achieve sustainable and self-generated development and deliver tangible benefits to its people.”
Sources close to the debt settlement negotiations between Harare and Beijing told this publication that Ncube traveled to China in October.
In China, he met with officials from Eximbank.
The sources added in several briefings that the deliberations focused on Harare’s request to reschedule the debt. Debt rescheduling refers to restructuring loans by reducing payment amounts by extending repayment periods.
This can also be done by increasing the number of payments.
“Finance Minister Ncube traveled to China in October where he met with senior officials from the Export-Import Bank of China and other senior officials from the Chinese Ministry of Finance,” a senior government source said.
“Discussions between the parties focused on exploring flexible ways for Zimbabwe to settle its debt obligations. China is confident that Zimbabwe will meet its obligations.
Questions put to Ncube to gain an understanding of how his discussions with Eximbank developed were not addressed.
Some of the loans Zimbabwe has borrowed from China recently include US$152.8 million for the modernization of the Robert Gabriel Mugabe International Airport, US$997.7 million for the expansion of Hwang Units 7 and 8, and US$98.7 million for construction. National Defense College and a $149.9 million facility to expand Victoria Falls International Airport.
In a 2006 paper titled: “The Export-Import Bank of China and Africa: New Lending, New Challenges,” Center for Global Development The bank, whose headquarters are located in Washington, confirmed that the bank has become an alternative source of credit for countries isolated by the West.
“The rise of Chinese exports represents a potentially important trend for African development by providing a new source of capital, especially for much-needed infrastructure investment,” the paper states.
“For pariah regimes like Sudan or Zimbabwe, these credits can be a lifeline.” Independent Zimbabwe
