Afreximbank loans Zimbabwe $500 million as dollar crisis worsens

By Nelson Banya | Reuters |

The African Export Import Bank (Afreximbank) says it is finalising a $500 million loan facility for Zimbabwe, to help secure the foreign-currency starved southern African country’s imports.

Zimbabwe is experiencing a shortage of foreign currency, blamed mainly on a huge trade deficit caused by the collapse of its key agriculture and manufacturing sectors.

The country, which adopted the use of multiple foreign currencies — chiefly the United States dollar and South Africa’s rand — in 2009 to tame hyperinflation, is gripped by acute shortages of cash dollars. Prices of basic goods, public taxis and medicines have risen in the last few weeks.

The Afreximbank said it had held discussions on the loan with Finance Minister Mthuli Ncube at last week’s International Monetary Fund and World Bank Group meetings in Bali, Indonesia.

“The ultimate goal of the facility is to secure payments for essential imports and to promote exports,” the bank said in statement. “It is envisaged that this will restore foreign currency liquidity and stability in the market.”

According to Zimbabwe’s central bank governor John Mangudya, the facility will also act as a guarantee that individual depositors of foreign currency and those receiving remittances from abroad, will be able to access their funds.

Afreximbank has extended several loans to Zimbabwe in the past and remains one of the few international institutions still lending to the country, which is struggling to service nearly $6 billion arrears with the World Bank, African Development Bank (AfDB), the European Investment Bank (EIB) and the Paris Club.

Ncube has said he had won approval from the IMF and World Bank for Zimbabwe’s plan to clear $2.2 billion arrears owed to the World Bank, AfDB and EIB. Ncube’s plan will see cuts in government spending and its wage bill, and privatisation of loss-making state-owned firms.