Confusion over $2bn loan from China to Zimbabwe

AFTER its desperate quest for a critical US$2,5 billion bailout package from China hit a snag last week, government has somersaulted and now claims it did not request any such money.

Ministry of Finance and the Reserve Back of Zimbabwe (RBZ) officials have for some time been negotiating for a loan from the Industrial and Commercial Bank of China (ICBC) and the Export-Import Bank of China, without any breakthrough as Beijing remains cautious about Harare's ability to repay loans.

Zimbabwe has a mammoth external debt which has over the years ballooned to over US$12 billion, with arrears of over US$300 million from previous Chinese loans alone.

Hopes were high that President Emmerson Mnangagwa would — in bilateral engagements with his Chinese counterpart Xi Jinping on the sidelines of the Forum on China-Africa Co-operation (Focac) in Beijing last week — be able to secure the rescue package but he returned home empty handed. The money, it was hoped, would ease the country's crippling liquidity crisis. In an interview with the Zimbabwe Independent this week, Foreign Affairs and International Trade minister Sibusiso Moyo said there was never a request by Harare for the much-needed financial assistance to the giant Asian nation in the first place.

"We never made a request for that bailout from China. We only read about it in the Press. We however agreed on many aspects relating to funding of several infrastructure projects and we are excited about those," he said.

When asked about earlier pronouncements suggesting that government had formally engaged the Chinese for the funding, Moyo retorted: "I don't know about that."

This is despite the fact that former finance minister Patrick Chimanasa and Reserve Bank of Zimbabwe governor John Mangudya told the public media during the visit that government had indeed been fighting to secure critical funding.

"We are looking at US$2,5 billion lines of credit to support the entirety of the productive sectors, tourism, mining, industry, agriculture and manufacturing, among others," Chinamasa told journalists as he emerged from meetings with Chinese officials during the summit.

Mangudya said: "Zimbabwe's economic development hinges on the access to capital and in that vein we are excited that the US$60 billion package announced by President Xi Jinping is going to be accessible to African countries. We as Zimbabwe we are taking this matter seriously and engage with other financial institutions here and see how best we can make the economy improve through such lines of credit."

A senior official at the Chinese embassy has also confided in the Zimbabwe Independent that arrangements for a bailout appeared a real prospect when Mnangagwa led his team to Beijing, but the plan fell through on account of the failure by Zimbabwean officials to demonstrate capacity and willingness to settle arrears from previous loans as well as table concrete future debt repayment plans. The differences in their statements point to serious policy confusion in Mnangagwa's administration over how to achieve the much-needed economic turnaround of the country.