By Shame Makoshori
China’s move three weeks ago to extend US$218 million in fresh grants and loans for multiple projects came after the reversal of a decision to halt new lifelines to ex-president Robert Mugabe’s administration, after it defaulted on previous loan repayments, a deputy minister has revealed.
China, which has emerged as one of Zimbabwe’s closest allies after Harare was slapped with sanctions by the West, is estimated to have extended close to US$2 billion funding in the past 17 years.
Zimbabwe’s external debt, including loans to the private sector, stands at about US$13 billion.
It emerged three weeks ago that Zimbabwe had defaulted in servicing Chinese loans.
One of the key projects affected by China’s hardening stance against the Mugabe government was the cessation, by the China Export Import Bank, of disbursements under a $144 million loan facility signed in 2013 to fund the upgrade of Harare’s water and sewage works, which has now gone beyond its initial deadline by over a year.
The bank made an initial payment of 50 percent of the project cost but has, since then, refused to provide any further funding for the expansion of Harare’s daily water supply capacity from 520 megalitres to 620 megalitres, which was due for completion in June 2016.
Deputy Minister of Finance and Economic Planning, Terrence Mukupe, revealed last week that the Chinese had taken the unprecedented step to freeze further bailouts over the defaults.
He said Zimbabwe’s previous government had kept the nation in the dark over the defaults, as well as the stoppage of new loans.
Mukupe said the Chinese had only revisited the decision when President Emmerson Mnangagwa took over last month through a military led intervention that forced Mugabe to resign.
“We have seen the Chinese opening up to give us loans,” Mukupe told delegates at the Zimbabwe currency dialogue 2017 conference organised by the advisory firm, Econometer Global Capital in Harare on Thursday.
“The Chinese had closed their loans. That had shut the taps on Zimbabwe. There was no way the previous government would tell you,” added the deputy minister.
He had been asked to explain the measures that the Ministry of Finance had lined up to address several problems affecting the economy, including the unending banking hall queues resulting from cash shortages, and a widening current account deficit that has been driven by a plunge in export and a rise in imports.
Mukupe said it was difficult to estimate when bank queues would be addressed, but assured that the new administration had deployed its energies on facing one of Africa’s longest and most brutal economic crises head on.
Reengagement efforts with the international banking system would be among the most immediate tasks, he said.
He spoke two days after the African Export and Import Bank (Afreximbank) pledged to give $1,5 billion in new loans and financial guarantees to Zimbabwe.
The deal reinforced sentiments that the world was reassessing its relations with Zimbabwe to give Mnangagwa the chance to rebuild the country after 17 years of economic turbulence.
The new president has vowed to focus on reviving the struggling economy and provide jobs in a nation with an unemployment rate exceeding 90 percent.
Afreximbank was one of the only few international banks that stood by Zimbabwe throughout the difficult 37 years of Mugabe’s rule.
Part of the deal would see Afreximbank providing $150 million to local banks to help them pay for outstanding critical imports.
While China has provided succour to Zimbabwe, reports had suggested that Beijing was inreasingly getting impatient with Harare’s inability to service loans extended since 2000.
Finance Minister Patrick Chinamasa confirmed that Harare had defaulted on Chinese debts about two years ago.
“We have run into difficulties,” Chinamasa said.
“We have not been able to service our debts in the past one or two years. This is where our friendship with China comes in. We are happy that the Chinese understand our difficulties. This is why we call them all-weather friends. With the Chinese, the umbrella is always there, whether it is raining or not. But we want to honour our debts,” said Chinamasa.
“We want to honour our debts, not only to China, but to the rest of the world,” Chinamasa told The Financial Gazette. The Financial Gazette