Zimbabwean Central Bank to restructure onerous Afreximbank loans




Reserve Bank of Zimbabwe

The Reserve Bank of Zimbabwe (RBZ) is working on restructuring its debts with African Export-Import Bank (Afreximbank) amid concerns that the loans are an onerous burden to the economy.

The RBZ borrowed a total of US$1.4 billion from Afreximbank between December 2017 and December 2019 “for the purchase of strategic commodities”.

The first loan agreement of US$600 million dollars in which the Government of Zimbabwe was guarantor, was signed on December 27, 2017.  This loan was due at the end of last year but indications are that it might not have been paid back.

The second loan, amounting to US$500 million was signed on May 21, 2019, while the third loan of US$300 million was signed on Dec. 31, 2019.

Last year, as the central bank established the foreign currency auction system, it got another facility from the Afreximbank resulting in the total debt reaching US$1.7 billion.

The tenure of the loans ranged from three years to five years and carried total cost, including management fees, advisory fees, participation fees, letter of credit fees, and LIBOR plus interest of approximately 12 percent. 

The average total cost of the debts is seen by market watchers as onerous and leaves the country in a debt trap. Normally, a debt trap will result in default of payments while interest payments become an albatross to growth.

The Zimbabwe National Chamber of Commerce has on several occasions cautioned the continued accumulation of expensive loans from Afreximbank.

In its 2021 Monetary Policy analysis, ZNCC reiterated that “there is need to exit from the costly Afreximbank loans”.

Again at a recent meeting with central bank governor Dr John Mangudya, the business representative body enquired further on the Afreximbank loan facilities.

In response, Dr Mangudya reportedly dismissed ZNCC’s concerns that the loans were expensive arguing that there was no other facility to make comparisons with since traditional funders like World Bank and IMF have not been extending assistance to the country.

Dr Mangudya, however, told the ZNCC meeting that the RBZ is restructuring the US$1.7 billion facilities so that they can be spread to over seven years at an affordable interest rate. 

Dr Mangudya was, however, not picking his phone when the Business Weekly called to get further clarity on the planned restructuring. – Business Weekly