Foreign loans that use minerals as collateral may set hurdles on Zimbabwe’s chances of accessing credit loans from foreign creditors to restructure its $8.8 billion debt, an International Monetary Fund official has said.
By Kudakwashe Vhenge
Zimbabwe which has been unable to get funding from lenders like the IMF since defaulting on its debt in 1999, has over the last five years relied on Afrexim Bank for mineral-backed loans.
The country however still faces foreign currency crunch that has led to shortages of fuel, medicines and a sharp increase in prices coupled with the devaluation of the RTGS$.
“Zimbabwe remains in debt distress”, said Gene Leon, the IMF mission chief to Zimbabwe.
“Its $2.6 billion arrears to the World Bank, African Development Bank and European Investment Bank prevent access to new funds from multilateral lenders”, he added.
The government has contracted external loans on commercial terms that are collateralized by mineral exports. These have been used to help the authorities in responding to the economic and humanitarian crisis that are constantly bedeviling the country.
Zimbabwe’s projections of economic growth are predicted to be revised in the short term because of drought and a cyclone that battered the eastern regions as the IMF forecasts the economy to shrink by 2.1 percent this year.
President Emmerson Mnangagwa’s government which has made debt clearance its top priority has agreed an IMF staff programme with hopes that it will help pay off multilateral lenders and Paris Club creditors next year.
The Central Bank, which has previously said it borrowed $985 million from African lenders last year, said on May 19 recently said, it had secured $500 million from unnamed international banks.
Critics have expressed concern on the manner in which President Mnangagwa has resorted to use natural resources especially minerals to cover up imminent economic decay whilst jeopardizing future generations.
Constitutional lawyer and political commentator, Dr Alex Magaisa lamented on the lack of foresight on the part of the establishment highlighting trading natural resources for short-lived economic gains.
“The worry for young Zimbabweans is that the family’s silver is being mortgaged daily by desperate old chaps for short term fixes”, Magaisa posted on his Twitter handle today.
