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Zimbabwe urged not to mortgage minerals

by Staff reporter
13 Jun 2014 at 12:25hrs | Views
The World Bank has warned Zimbabwe against mortgaging its minerals, saying this jeopardises future generations' welfare.

Nadia Piffaretti, the World Bank's senior economist,  told a news conference on Wednesday that the hard-pressed southern African nation would be better advised to seek loans at concessionary rates instead of securitising its minerals to secure loans.

"Securitisation of minerals is one way of financing things," Piffaretti said.

"However, it brings a lot of risks. It's not an easy solution because you might end up giving away more than you are getting.

"It's not really advisable at your development stage because you might just take away the future of your children."

Piffaretti said instead, Zimbabwe must seek loans, which have clear-cut terms and conditions.

"Securitisation is a legitimate tool in the toolbox but it is not advisable," she warned.

This comes as Zimbabwe, which is struggling to secure $27 billion to finance its economic blueprint ZimAsset, recently directed diamond firms to deposit their gems with the Reserve Bank of Zimbabwe as part of wider efforts to secure external loans by securitisation of minerals.

Zimbabwe has an external debt of approximately $10,7 billion.

However, China - considered an all-weather friend of Zimbabwe - has indicated that it wants the southern African country to use its minerals to guarantee future loans.

Faced with a biting liquidity crisis and the urgent need to recapitalise industry and increase its capacity, which fell from an average 44,6 in 2012 to about 39,6 percent in 2013, government is making frantic efforts to mortgage the minerals to the emerging Asian giant.

Thabani Nyoni, the Bulawayo Agenda director, recently said while there was nothing wrong with Zimbabwe funding its development with minerals, the earmarked deal with China raises a lot of concerns.

"What they are doing is tantamount to mortgaging the country because government agreed to securitise with minerals it does

not know how much they are worth," he said.

Nyoni noted it was not clear whether the deal, although adhering to the ZimAsset proposals, did not violate other government policies such as beneficiation and indigenisation.

Securitisation of minerals is one of the proposals made in the Zanu PF government's economic blueprint, ZimAsset, to fund development for the next four years.

Source - dailynews
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