Zimbabwe borrowed US$1,4bn to prop up economy
ZIMBABWE borrowed US$1,4 billion from the African Export and Import Bank (Afreximbank) since 2017 to finance acquisition of strategic commodities, currency reforms and prop up the economy.
According to an extra-ordinary Government Gazette published at the weekend, the Reserve Bank of Zimbabwe (RBZ) contracted three loans with Afreximbank since 2017 that were guaranteed by the government.
The country was advanced a US$600 million loan by Afreximbank on December 27, 2017 for a period of three years. The line of credit was used to support the RBZ in financing trade-related transactions and projects in the country, including the purchase of strategic products like fuel.
Its financing was supported by the country’s export proceeds, including gold and other mining exports. The loan was meant to boost trade into and out of the country and promote economic development.
On May 21, 2019, the Government Gazette reported, the RBZ entered into a US$500 million loan agreement with the pan-African bank for a period of four years to be “utilised for the purchase of strategic commodities and prospective currency reform programme”.
The same year on December 31, Afreximbank entered into a US300 million loan with the central bank. The loan had a tenure of five years and was meant to purchase strategic commodities for the country. The loans were at concessionary rates.
The country embarked on currency reforms that saw it reintroducing the-then demonitised Zimbabwe dollar in June 2019, dumping a multi-currency regime dominated by the United States dollar, introduced in January 2009. Finance and Economic Development minister Mthuli Ncube caused the publication of the loan agreements in the Government Gazette in terms of the country’s constitution.
Afreximbank has over the years became a lender of last resort for Zimbabwe after the World Bank, the International Monetary Fund and other multilateral financial institutions withdrew funding to the country, arguing the southern African nation had failed to settle its international debts.
But the country argued the matter was more political than financial after it was slapped with sanctions by the European Union and the United States at the turn of the century when the government embarked on a chaotic land reform programme in the early 2000s that resulted in white commercial farmers losing land and property to indigenous blacks.