Unable to get funding from lenders like the IMF Zimbabwe has over the last five years relied on the Afreximbank for mineral-backed loans. File Photo: IOL

INTERNATIONAL – Foreign loans that use minerals as collateral may complicate Zimbabwe's future negotiations with foreign creditors to restructure its $8.8 billion (R127bn) debt, an International Monetary Fund (IMF) official said on Monday.

Unable to get funding from lenders like the IMF since defaulting on its debt in 1999, Zimbabwe has over the last five years relied on the African Export and Import Bank (Afreximbank) for mineral-backed loans. 

But the country still faces a dollar crunch that has led to shortages of fuel and medicines. Zimbabwe remains in debt distress, said Gene Leon, the IMF mission chief to Zimbabwe. 

Its $2.6bn arrears to the World Bank, African Development Bank and European Investment Bank prevent access to new funds from multilateral lenders. “In this context, the government has contracted external loans on commercial terms that are collateralised by mineral exports,” Leon said in an emailed response to Reuters. “While these loans can help the authorities in responding to the economic and humanitarian crisis that is unfolding, they may also complicate future negotiations with external creditors to restore debt sustainability.” 

Leon said Zimbabwe’s projections of economic growth would probably be revised in the short term because of drought and a cyclone that battered the eastern regions. 

The IMF forecasts the economy will shrink by 2.1 percent this year. President Emmerson Mnangagwa, who came to power after a coup toppled Robert Mugabe in November 2017, has made clearing foreign arrears a top priority. 

His government has agreed on an IMF staff programme it hopes will help pay off multilateral lenders and Paris Club creditors next year. The central bank, which has previously said it borrowed $985 million from African lenders last year, said on May 19 it had secured $500m from unnamed international banks. Treasury officials said the money was from Afreximbank. 

That loan included $100m bridging finance in February, two treasury sources said, adding that some of the money was used to buy fuel and make “token” payments to South Africa for past electricity imports.