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Zimbabwe takes out $153 million loan

PICTURED: Emmerson Mnangagwa l

ZIMBABWE’S NEW government signed a $153 million (£114 million) loan agreement with
China last week.

The new deal, which is the first post-Mugabe deal with a foreign government, will help refurbish and redesign the country’s international airport, which is just outside Harare.

The need to improve the airport is seen as critical to new President Emmerson Mnangagwa’s plans to attract investors and tourists.

Mnangagwa, who was sworn in as president last month (November 24) after the army intervened to end Robert Mugabe’s 37-year rule, has vowed to rebuild the country’s ravaged economy and re-engage with the international community.

After signing the agreement – one of three – with Chinese ambassador Huang Ping, Finance Minister Patrick Chinamasa said: “This (airport project) and the budget we are presenting tomorrow will show we are serious about reshaping our economy.”

He added that the deal means “we are back in business to build the capacity to honour
our obligations not only to China but also to our international creditors”.

The loan for refurbishing the Robert Gabriel Mugabe airport is payable in 20 years with interest rates of two per cent per year and a seven-year grace period.

OUSTED: Robert Mugabe was replaced as president by Emmerson Mnangagwa last month

The other two agreements are for grants worth 400 million yuan for a new parliament building and for expansion of a computing centre at the University of Zimbabwe.

Chinamasa, who was re-appointed to the finance ministry post last week, admitted that the country had failed to repay China for previous loans – but added that Beijing was still willing to deal with Zimbabwe.

“The Chinese government understands the economic situation we are going through,” he said. “We’re under sanctions and had no lines of credit coming into the country. This is why we call them ‘all-weather friends’.”

The issuing of billions of dollars of domestic debt to pay for a bloated civil service - a key component of the ZANU- PF patronage machine under Mugabe – also triggered a collapse in the value of Zimbabwe’s de facto currency and ignited inflation.

One of Mnangagwa’s most pressing tasks will be to patch up relations with donors and the outside world and work out a deal to clear Zimbabwe’s $1.8 billion of arrears to the World Bank and the African Development Bank.

Inflation in the southern African country currently exceeds 200 per cent and unemployment is above 90 per cent. Many citizens have not known a time without Mugabe, who has dominated every aspect of public life since coming to power in 1980 on the country’s independence from Britain.

Theophilus Acheampong, Zimbabwe analyst at information services company IHS Markit, said that Zimbabwe’s economic growth depends on what kind of deals new president Mwangagwa is able to achieve.

He told CNBC: “Improvement in the liquidity and FX (foreign exchange) flows over the medium-term, possibly driven by increased agricul- tural output, (could) improve electricity supply and minerals production.

“Mnangagwa’s allies coming back to government means that these proposals are likely to go ahead. The country is carving a new image for itself on the political and economic front with various pro-business reforms that will attract FDI (foreign direct investment) into the country.”

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