Zimbabwe is settling a $400 million loan from the African Export-Import Bank with the proceeds of its platinum exports as the indebted nation turns to its mineral wealth to open lines of credit.
Bloomberg reported that the southern African nation’s reliance on its platinum resources to secure borrowing emphasizes the difficulty Zimbabwe faces in getting loans from international financiers.
The repayment mechanism involves allocating 35% of Zimplats’ export proceeds, managed by the Reserve Bank of Zimbabwe (RBZ), to repay the Afreximbank loan. Zimplats, a platinum miner, operates as a unit of the Johannesburg-based Impala Platinum.
What you should know
Zimbabwe currently grapples with a substantial $18 billion debt burden, rendering it ineligible for new credit lines from multilateral lenders like the World Bank, International Monetary Fund (IMF), and the African Development Bank.
In February, the government signed a $400 million loan agreement with Afreximbank, designated for budget support and trade-related infrastructure financing. The loan carries a 10.2% interest rate over a six-year term, with the borrowing cost escalating to 12.2% in the event of default.
Zimbabwe’s Treasury views the Afreximbank loan as a significant success for the government, especially considering the nation’s two-decade exclusion by international lenders. Limited access to external finance, particularly for budget support, has characterized Zimbabwe’s financial landscape.
Rich in mineral resources such as gold and diamonds, Zimbabwe recently introduced a new levy on lithium and a wealth tax to fund a substantial increase in spending aimed at bolstering the economy.
This move follows an 89% depreciation of the Zimbabwean dollar against the US currency and an annual inflation rate exceeding 176%.
Debt clearance talks championed by Zimbabwe under the leadership of AfDB President Akinwumi Adesina are set to resume next month after a brief pause to accommodate elections in August.