Building a defence college with China's 20-yr $98 million loan is 'criminal'

Finance minister Tendai Biti has said the 20-year $98 million loan from China to build a defense college at Chitamba Farm in Mazowe was "criminal." The Zimbabwean reported on Thursday.

Responding to a question from Webber Chanyadza whether Zimbabwe could afford to continue borrowing funds for non-productive investments, Biti said the answer was no because the Chinese deal was attracting interest rates that were too high.

The deal was approved last month by both houses of Parliament after remonstrations from MDC-T legislators.

"Let me be very clear, when you are indebted, the precarious position that we are at the moment, you can not contract other debts. If you are going to contract other debts, it has to be concessionary debts. I want to make reference to Chinese Agreement that was ratified by this Parliament. It is criminal Mr. Speaker for a country like Zimbabwe to enter in an agreement with a rate of interest like 2%, 4% or 5%," Biti said.

"I want to say that there are friends let me put 'friends' in inverted comas 'friends and countries' that have been prepared to give Zimbabwe money. Mr. Speaker Sir, but when you look at the agreement, the agreements are levying interests in the name of concession of 2% and above. A country like Zimbabwe does not have the capacity of repaying those interests. It does not have the capacity of paying such amounts."

Zimbabwe is currently reeling under a staggering US$7.1 billion foreign debt.

Biti said the Chinese were charging interest rates that were even higher than what they are buying US Treasury Bills.

"Until recently, China was holding US Treasury bills in excess of a trillion dollars. When China buys those Treasury bills, the yield on those Treasury bills is below 1%," Biti said.

"In other words, the cost that they are buying those bills, the interest is less than 1%. Mr. Speaker, if they are friends, it is ironic that they want more than 2% or more than 5% yet they are prepared to accept less than 1% on Treasury bills. These are the representations which we have made to the Chinese government. If you are our friends and you know that we are poor, you certainly can not give us a rate of interest that is more onerous than that you are giving to your capitalists' friends. That is the representations which we are making," Biti said.

Biti said the the politics has become a debilitating instrument against resolving the debt crisis and accessing lines of credit from Zimbabwe's true friends.

"We need to speak with one voice and come up with a common policy. I want to say lastly, the debt question; to us in the Ministry of Finance is no debt issue. It is not about the debt. This country defaulted in 1999. The US $7.1 billion we are talking about is not new money. It is not money that was contracted between 2000 and now. It is money that was contracted between 1980 and now," Biti said.

"I want to say there are debts that were there in 1980. That National Sports Stadium, we have not paid for it. It is old debt, we defaulted and have defaulted."

The Finance minister said unless Zimbabwe is able to clear the arrears owed to the World Bank, IMF, African Development Bank , Zimbabwe will not be able to access cheap concessionary money that is found at the World Bank.

"In 2010 alone, the World Bank gave to Africa US$75 billion. Over the next five years, African Development Bank is going to give to Africa US$30 billion. In 2009 alone, the African Development Bank gave to South Africa US$4 billion for its electricity to ESKOM. If we were to have that kind of money to Zimbabwe, there will be no black outs. We need to deal with the issue of debt, not because we love to pay debts, but because it is a precondition of us accessing huge billions of money that are found in the African Development Bank and the World Bank in particular. Unfortunately, our politics is ugly. We are killing and beating up people and because we are doing that nobody will charge us," Biti said.