Chinese govt writes off interest-free loan given to Zimbabwe
China has written off an undisclosed amount of Zimbabwe’s interest-free loans and pledged to help the country navigate its way out of its current debt crisis. But Zimbabwean activists warn of a permanent debt trap.
According to the East African, Zimbabwe’s debt as of September 2023 stood at $17.7 billion, of which $12.7 billion was external and $5 billion domestic.
Most of the country’s foreign debt was purchased from China as the country is currently ineligible to secure loans from multi-lateral creditors such as the International Monetary Fund (IMF) and the World Bank after it defaulted on repayments.
Since the exit of the country’s long-term president, Robert Mugabe six years ago, the southern African country has struggled to reach an agreement with creditors to restructure its unsustainable debt.
China which is now Zimbabwe’s largest creditor outside the West has stated its commitment to helping Zimbabwe pull out from its sticky debt situation.
“China attaches great importance to resolving Zimbabwe’s debt issues,” said China’s ambassador to Zimbabwe, Zhou Ding.
“China would like to enhance communication with the Zimbabwe government to work out proper statements through friendly consultation. As a concrete measure, China has cancelled Zimbabwe’s interest-free loans, which matured by the end of 2015.” Zhou added.
The Chinese diplomat did not disclose the amount of loans written off by the Chinese government but experts believe it’s not high due to the fact that Zimbabwe increased its Chinese debts for infrastructural projects at the end of President Mugabe’s nearly four-decade rule.
President Mnangagwa’s government has continued to borrow heavily from China, but Mr. Zhou said it was not true that Zimbabwe was now in a death trap because of excessive Chinese loans.
The Chinese government has been criticized by the West for lending money to countries that cannot pay back, thereby creating a growing list of African countries dependent on Chinese funding as a strategy to counter US influence in the continent.
China vehemently denies the accusations, saying its relations with African countries are based on the policy of non-interference in other countries’ affairs.
in 2022, the Zimbabwean government announced that it had borrowed $200 million from China, securing the loan with 26 million ounces of platinum reserves.
Zimbabwe also borrowed billions of dollars from China to finance the upgrade of two of its main international airports and to expand its two main thermal and hydroelectric power stations.
The Zimbabwe Coalition on Debt and Development (ZIMCODD) has raised the alarm on the rising Chinese debts secured by the Zimbabwean government, citing a possible debt trap which could have the southern African country servicing debts instead of serving its people.
What to Know
In August 2022, China announced that it would provide 23 interest-free loans to 17 unnamed African countries, a move analysts said at the time was designed to counter accusations that Beijing was engaging in “debt-trap diplomacy”
Rough estimates by experts put Zimbabwe’s debt to China at $3 Billion
Meanwhile, Zimbabwe also secured a $400 million loan from Afreximbank for budget support and financing of trade-related infrastructure, which it will repay by using 38 per cent of the export earnings of the country’s largest platinum miner.
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