ICYMI: China writes off portion of interest-free loan given to Zimbabwe

China has written off an undisclosed amount of Zimbabwe’s interest-free loans as it pledges to help the country find a way out of its ongoing debt crisis.

According to a report on Thursday, most of the foreign debt was purchased from China, as the country is ineligible for loans from multilateral creditors such as the World Bank and the International Monetary Fund (IMF).

Zimbabwe’s inability to access loans is due to its default to repay these loans which is over two decades.

In its September 2023 report, Zimbabwe Coalition on Debt and Development (Zimcodd) said the publicly guaranteed debt stood at $17.7 billion, of which $12.7 billion was external and $5 billion was domestic.

Meanwhile, Zimbabwe has been struggling to reach an agreement with creditors to restructure its unsustainable debt since the ouster of former president Robert Mugabe six years ago.

The report added that former Mozambican president Joachim Chissano and Akinwumi Adesina, African Development Bank (AfDB) President, are leading the debt restructuring dialogue, which suffered a blow last month when the United States withdrew its support, citing the country’s reluctance to reform.

Speaking on the development,  Zhou Ding, China’s ambassador to Zimbabwe, said “China attaches great importance to resolving Zimbabwe’s debt issues”.

“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 said.

Although Zhou did not disclose the amount of loans written off, observers said it may not be much, as Zimbabwe increased its Chinese debt for infrastructure projects.

“According to the data released by the Zimbabwean government, Zimbabwe’s debt owed to Western countries and international financial institutions accounts for 70 percent of its external debt, while the debt owed to China only accounts for 15 percent,” Zhou added.

China is now Zimbabwe’s largest non-Paris Club creditor.

In August 2022, China announced that it would forgive 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”. 

In February 2023, Zimbabwe signed a $400 million loan with Afreximbank for budget support and the financing of trade-related infrastructure, according to the latest public debt report prepared for lawmakers by Zimbabwe’s treasury.

The financing carries a 10.2 percent interest rate and matures in six years, with the borrowing cost increasing to 12.2 percent in the event of default.

On December 4, 2023, Zimbabwe said it was using the proceeds of its platinum exports to settle a $400 million loan from the Afreximbank.