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Zimbabwe’s huge debt limiting

access to new Chinese loans

ZIMBABWE ZIMBABWE is falling behind in its loan repay- debt) remain a major protracted challenge to
ments to China, which is hampering the dis- restoring debt sustainability to the economy,
bursement of new facilities, the Nation writes, resulting in the lack of access to official external
citing a Zimbabwean treasury report. financing.”
The southern African country took out large As of the end of May, Zimbabwe had made
Chinese loans during former President Robert $8mn in token payments to multilateral banks
Mugabe’s rule to expand airports, build new and $4.8mn to the Paris Club, according to the
electricity generating plants, road infrastructure Nation. It paid up its IMF debt of about $100mn
and secure farm machinery, among others. The in 2016.
ongoing economic crisis is limiting Zimbabwe’s Finance Minister Mthuli Ncube has said the
capacity to repay them. government is considering taking the Heavily
“The low disbursement of loans is due to accu- Indebted Poor Country (HIPC) route to debt
mulation of arrears to active China Eximbank relief, an initiative that it rejected some 10 years
loans on projects such as the Victoria Falls ago. Also, according to a Bloomberg report, the
International Airport ($54mn), NetOne net- government had agreed to pay off its $225mn
work expansion ($61mn) and expansion of the debt to global commodity broker, Trafigura via
Robert Gabriel Mugabe International Airport sales of gold and nickel.
($3mn),” the Nation quotes the report as saying. However, mortgaging natural resources to
Zimbabwe’s foreign debt is estimated at pay off debts could prove dangerous in the long
$13.5bn and the country has struggled to keep run, the World Bank has warned. In the June
up with instalments since 2000, due to a severe 2022 paper Developing economies should think
economic crisis resulting from international hard about taking resource-based loans, the
sanctions, mounting debts, drought, govern- World Bank singles out Zimbabwe and Chad
ment mismanagement and corruption. among other sub-Saharan African countries
In response, the International Monetary that must exercise care in managing their debts.
Fund (IMF), World Bank, Paris Club and other “For now, however, developing economies
major lenders stopped supporting the country. with rising financing needs should remain wary
With no support from the financiers, Mugabe of resource-backed loans. In a time of excep-
turned to China for bailouts. tional economic uncertainty, they should seek
The treasury report notes that “arrears on the lowest-cost, lowest-risk sources of financing
external debt, which amounted to $6.6bn (49% —instead of mortgaging their futures to com-
of the public and publicly guaranteed external modity brokers,” it said.™

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