From a platinum-backed loan to talks with small UK banks: Here’s what new report shows about Zimbabwe’s debt crisis

Alongside his Budget Statement, Finance Minister Mthuli Ncube last week also tabled the annual debt report, which shows how much Zimbabwe owes. What does the latest report tell us? Zimbabwe remains in a deep debt hole and penalties are piling up. The report also partly explains why, with no external support, Mthuli will continue to tax citizens more and remain unmoved on pleas to let exporters keep more of their forex earnings.

Here is what we learn from Zimbabwe’s annual debt report.

How much do we owe?

In total, public and public guaranteed debt (PPG) was US$17.7 billion in September. Of this debt, US$12.7 billion (72%) is foreign debt and US$5 billion (28%) is local.

The government has a lot to worry about this coming year.

After taking over RBZ’s debt, the government must pay US$338 million to service the debts in the coming year. To pay off creditors with “blocked funds” – money belonging to foreign entities that is stuck in the country – Zimbabwe issued USD-denominated bonds. The first maturities are in 2025, amounting to US$390 million. This means the government must raise that money by that deadline or default, which would damage the country even further.

The government has since set up a Debt Redemption Fund to service these maturing bonds. This will be paid from foreign currency earnings from exporters, the fuel levy, and a 1% tax on foreign payments, and other taxes that Mthuli may have to come up with.

China vs Paris Club

Zimbabwe owes US$9.1 billion to bilateral and multilateral creditors. The Paris Club of Western creditors is owed US$3.9 billion. Zimbabwe owes China US$2 billion.

Zim paying big penalties

Because Zimbabwe has not paid its debts and arrears on time, it is charged penalties. This year alone, Zimbabwe has paid a significant US$227.6 million in penalties.

The average interest rate for the PPG external debt portfolio is 6.3%. The highest penalty rate for bilateral creditors is 12.2%, from the French COFACE, while the highest penalty rate for multilateral creditors is 10.5% from the European Investment Bank.

Platinum secures new US$400m loan

Zimbabwe borrowed US$400 million from the Africa Export-Import Bank (Afreximbank) earlier this year, and that money will be repaid using a portion of platinum sales.

“Government, in February 2023, secured a US$400 million loan from Afreximbank for budget support and the financing of trade-related infrastructure. The US$400 million Afreximbank loan is repaid using 35% of Zimplats’ export proceeds, which are managed by RBZ,” the report says. The loan attracts 10.2% interest and maturity period is 6 years. According to Treasury, the “loan was a huge success for Government, given that it has been over two decades of limited access to external finance, especially for budget support”

Going small: Zim seeks money from mid-tier UK banks

Zimbabwe still cannot access funding from bigger global lenders given its poor credit record. So Treasury is scraping the bottom of the barrel, speaking to two small European banks for money. The government is negotiating a US$100 million loan from UK’s Broughton Capital. Broughton, on its website, claims to have arranged debt syndication of close to US$2 billion for Thailand’s infrastructure. It also claims to have partnered with China-East Resources Import & Export to provide a US$550 million arrangement for a rail project in Canada.

Treasury is also speaking to Dinosaur Merchant Bank, another lower-tier UK investment bank, for another US$125 million.

Healthy loans? ABSA, Standard Bank to release clinic loans in 2024

Earlier this year, ABSA and Standard Bank announced that they were to raise US$193 million for the construction of hospitals and clinics in Zimbabwe. Government expects the loan to start coming through in 2024, with US$105 million to be disbursed. The loans will be used to pay UK infrastructure company NMS, which has already built two clinics in Cowdray Park Bulawayo and Stoneridge in Harare. Those two were paid for by the government under an initial US$25 million phase of the project. The project will now see five district hospitals and 30 clinics built by NMS, using the loans from the two South African banks.

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