Zimbabwe gets loan for $1.7bn AFDB, World Bank arrears

Nairobi - Zimbabwe has secured a syndicated loan put together by the African Export-Import Bank that will enable it to clear $1.7bn of arrears with the World Bank and African Development Bank.

The funds will allow the southern African nation to settle $1.1bn it owes in interest and penalties and and some principal debt to the World Bank and $601m to the AFDB, Finance Minister Patrick Chinamasa said. He didn’t name the lenders but said the rate on the loan is cheaper than that charged by the World Bank.

“It should reduce our country-risk profile and also make us eligible for access to soft windows of those institutions - we need new inflows,” Chinamasa said in an interview in Nairobi, the Kenyan capital. “It also opens up to other institutions to do business with us, also make us able to access international capital.”

Chinamasa has been leading efforts to revive the country’s struggling economy and tap fresh financing from the International Monetary Fund. The economy has halved in size over the past 16 years.

Zimbabwe has paid he $110m it owes the IMF, the minister said. As of October, the country owed lenders including the IMF, World Bank and AFDB about $9bn, according to the finance ministry, and missed a $1.8bn payment in June.

The nation abandoned its own currency in April 2009 as runaway inflation rendered it worthless, opting instead for a basket of currencies that includes US dollars, South Africa’s rand, the pound and Botswana’s pula.

Rand options

A shortage of banknotes has become so dire that business are offering huge discounts to cash-paying customers, limiting the amounts they can charge on credit cards or refusing to accept them altogether. The central bank has introduced dollar-pegged bond notes that citizens dub “zombie currency.”

The liquidity crisis “is temporary,” Chinamasa said. “We have to find ways to make rand more available. We would like a situation where we borrow in rands from South Africa, pay back in the same currency. We will continue to engage them.”

Zimbabwe conducts 60% of its trade with South Africa, the continent’s most developed economy, Chinamasa said.

The economy is forecast to expand 3.7% in 2017 from 1.7% last year, supported by agriculture, he said.