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Backlash over Chinese loans

China Eximbank has been one of the most active big lenders on the domestic market, where it has bankrolled crucial public infrastructure projects including rehabilitation of airports and power stations.

BY SHAME MAKOSHORI ZIMBABWE’S debt-stricken administration last year struggled to access fresh loans to scale up ambitious plans to revamp key infrastructure projects after accumulating significant arrears on lifelines from one of China’s biggest lenders, a new report has indicated.

The Annual Debt Bulletin 2021 Financial Year report obtained yesterday by NewsDay Business said arrears to China Eximbank mounted during 2021 frustrating efforts for fresh disbursements, as Harare honoured a pledge to send out token payments to several global lenders including the Paris Club.

China Eximbank has been one of the most active big lenders on the domestic market, where it has bankrolled crucial public infrastructure projects including rehabilitation of airports and power stations.

“Disbursements of external on-lent loans, for the period January to December 2021, which were from the China Eximbank for the Zimbabwe Power Company Hwange 7 & 8 Thermal Power Station project and the India Exim Bank for the Zimbabwe Power Company Deka Pumping Station and River Water Intake System project, amounted to US$24 million and US$3,9 million respectively,” said the report compiled by the Finance and Economic Development ministry.

“The OPEC Fund for International Development also disbursed a total of US$8 million for the three projects namely, Poverty Alleviation, First Education and Smallholder Irrigation Revitalisation. The low disbursements loans are due to accumulation of arrears to active China Eximbank loans (amounting to US$266 million) on projects such as Victoria Falls Airport (US$54 million), NetOne Network Expansion Phase I & II (US$ 61 million) and Expansion of the RG Mugabe International Airport (US$3 million),” the report added.

During the period January to December 2021, Treasury made total external debt service payments amounting to US$59,30 million, comprising of US$49,7 million for the active portfolio and US$9,60 million as token payments to the Multilateral Development Banks (MDBs) and Paris Club creditors. Government in September 2021, started making US$100 000 quarterly token payments to each of the 16 Paris Club creditors. As at end May 2022, since the resumption of the token payments, a total of US$8 million token payments had been made to the MDBs and US$ 4,8 million to the Paris Club creditors.

In September last year, Zimbabwe said it had made its first debt repayment to the Paris Club, a group of creditor countries, under a refreshed plan to clear arrears owed to several multilateral funders.

Debts have been blamed for the country’s struggle to secure fresh bailouts from international financial institutions to stabilise its troubled economy.

The Paris Club is a group of major creditor countries whose role is to find coordinated and sustainable solutions to debt repayment difficulties experienced by debtor countries.

As debtor countries undertake reforms to stabilise and restore their macroeconomic and financial situation, Paris Club creditors provide an appropriate debt payment plan.

These countries include Japan, United States of America, Germany, United Kingdom, Belgium and several others.

Zimbabwe had defaulted since 2001, after falling into a gruelling economic crisis, which saw inflation hitting a record 500 billion percent in 2008, with gross domestic product falling by 50% during the decade ending December that year.

After paying debts owed to the International Monetary Fund two years ago and rolling out the Lima debt clearance plan in 2015, the country has failed to live up to its promise, and has been accumulating high interests on the arrears.

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