Zimbabwe is reportedly seeking loans from mid-tier United Kingdom banks as it grapples with its significant debt burden. With a total debt of US$17.7 billion, the country is finding it difficult to secure funding from larger global lenders due to its poor credit record.
As of September, the total public and public guaranteed debt stood at US$17.7 billion, with 72% being foreign debt and 28% local debt, Finance Minister Mthuli Ncube revealed in the 2024 National Budget proposal last week. This means that the government owes a lot of money to both international and domestic creditors.
To meet its financial obligations, the government is now in talks with Broughton Capital for a loan of US$100 million, according to newZWire. Broughton Capital, which claims to have arranged debt syndication of close to US$2 billion for Thailand’s infrastructure, could be a potential source of funding for Zimbabwe. Additionally, the government is also negotiating with Dinosaur Merchant Bank, another UK-based investment bank, for a loan of US$125 million.
Furthermore, Zimbabwe is expecting to receive loans from ABSA and Standard Bank in 2024. The two South African banks have raised US$193 million for the construction of hospitals and clinics in the country. The loan disbursement is set to begin with an initial amount of US$105 million. This funding will be used to compensate UK infrastructure company NMS for its work in building healthcare facilities in Zimbabwe.
Given the challenging debt situation, Zimbabwe is exploring alternative sources of funding to address its financial obligations. While larger global lenders remain sceptical, mid-tier banks and partnerships with foreign entities offer potential solutions. However, Zimbabwe must take measures to improve its credit record and long-term financial stability.
Zimbabwe has been using its mineral resources as collateral to secure loans. In February 2023, the country borrowed US$400 million from the Africa Export-Import Bank (Afreximbank) for budget support and trade-related infrastructure. To repay this loan, Zimbabwe will use 35% of the export proceeds from platinum sales, which are managed by the Reserve Bank of Zimbabwe (RBZ).
This loan has a maturity period of 6 years and carries an interest rate of 10.2%. The government considers it a significant achievement, as it has been challenging for Zimbabwe to access external finance, especially for budget support, for over two decades.
In addition to platinum, Zimbabwe also uses gold and diamonds as collateral for loans. These valuable mineral resources serve as guarantees for lenders, providing them with an assurance that they will be repaid. There are concerns among some people that the minerals in Zimbabwe are being misused. The Zimbabwe Coalition on Debt and Development (ZCODD), for example, believes that the loans obtained using minerals as collateral benefit only a select few individuals, which they consider to be unfair.
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