First Zimbabwe post-Mugabe loan deal goes to China

China loans Zimbabwe millionsZimbabwe’s new government signed a $153 million loan agreement with China, its first post-Mugabe deal with a foreign government, to expand and refurbish Harare international airport as it bids to attract investors and tourists.

Emmerson Mnangagwa, sworn in as president after a de facto military coup ended Robert Mugabe’s 37-year rule, plans to rebuild the country’s ravaged economy and re-engage with the international community.

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

The deal means “we are back in business to build capacity to honour our obligations not only to China but also to international creditors,” Chinamasa said.

The loan for refurbishing the Robert Gabriel Mugabe airport is payable in 20 years with interest rates of two percent per year and a seven-year grace period. The other two agreements are for grants worth 400 million yuan ($60.48 million) for a new parliament building and for expansion of a computing centre at the University of Zimbabwe.

Chinamasa, re-appointed to the finance ministry post last week, admitted the country failed to repay China for previous loans. But he said 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’.”

Chinamasa is scheduled to present the 2018 national budget today.

He was finance minister from 2013 until he was shifted to the new ministry of cybersecurity in October. During his time in charge, the economy stagnated. A lack of exports caused acute dollar shortages that crippled the financial system and led to long queues outside banks.

The issuance 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 arrears to the World Bank and the African Development Bank.