News Column

U.S.$4 Billion Chinese Bailout

August 1, 2014

Herbert Moyo and Owen Gagare

PRESIDENT Robert Mugabe will this month embark on a state visit to the People's Republic of China as he desperately seeks a US$4 billion rescue package to stabilise Zimbabwe's worsening economic crisis characterised by a stubborn liquidity crunch, the Zimbabwe Independent has established.

Zimbabwe has been angling for a US$10 billion package from China, but government sources revealed the current push was for US$4 billion.

Mugabe's visit, confirmed by China's ambassador to Zimbabwe Lin Lin in an interview with the Independent at the Chinese embassy yesterday, comes hot on the heels of a similar recent visit by Finance minister Patrick Chinamasa, who led a 20-member inter-ministerial delegation to the Asian economic powerhouse last month.

Chinamasa's sojourn was officially described as a "10-day working visit to study the working of the Chinese economy".

He also visited China in January, but returned home empty-handed.

Chinamasa is currently in Russia as he continues to press for financial assistance that is proving elusive.

Mugabe last month appealed to a visiting China Communist Party delegation to assist by funding what he said was Zimbabwe's "economic struggle that we shall be waging with our natural resources so we can produce the necessary wealth for our people".

In June the World Bank's senior economist Nadia Piffaretti warned Zimbabwe against mortgaging its minerals for financial aid saying this jeopardises future generations' welfare. She said it would be better if the country sought loans at concessionary rates instead of securitising minerals to secure loans.

After being rebuffed by international financial organisations such as the International Monetary Fund, World Bank as well as investors with capacity to inject foreign direct investment, a desperate Mugabe has increasingly looked to "all-weather friend" China for assistance in reviving the moribund economy.

Government sources revealed Mugabe's visit was essentially a follow-up to Chinamasa's visits, adding the president was expected to push for a rescue package.

"The president will be leaving on the 21st and we are hoping that the visit will lead to the sealing of a US$4 billion From Page 1

assistance package with the Chinese government," said one senior government official.

"When Chinamasa visited China in January he was told by that country's government officials to come up with a fundable working plan to present to them instead of the ZimAsset document which they described as a mere policy pronouncement.

"He had to go back to the drawing board to come up with an acceptable workplan and it is on that basis that Mugabe expects the Chinese to give him US$4 billion to help resuscitate the economy."

Zanu PF has come up with an economic blueprint, ZimAsset, which requires about US$27 billion to fully implement between 2013 and 2018, but government has so far failed to mobilise the funds.

Mugabe's spokesperson George Charamba refused to comment on the visit or rescue package last week, referring questions to Chinamasa. Chinamasa also declined to comment.

Although he did not give a specific date and details about the rescue package, Lin confirmed Mugabe would most likely return home with some funds.

He, however, refused to disclose the structure of the deal, how much Zimbabwe wanted and how much Beijing was likely to part with, referring questions to Chinamasa.

The government has been planning to securitise the country's minerals in order to acquire desperately-needed funding for infrastructural projects and to fund ZimAsset, and it is believed this was contained in Chinamasa's proposals to the Chinese.

"This year President Mugabe has been invited to pay a state visit to China and this confirms the strong relations between China and Zimbabwe," said Lin.

"I cannot give you a date because the two sides are still in discussions about the details of this visit, but it will be in the near future. We are working on it."

He added: "Normally, during the head of state's visit, my government will provide some development assistance. This is normal practice ,but I don't know how much it will be this time. I can assure you that every year China will provide development assistance to friendly countries.

"Minister Chinamasa visited China in January and put forward proposals for getting assistance to China Exim Bank, but it is not something very simple. It is not like you have US$5 and then you buy your T-shirt -- this is a serious issue. It needs serious study from both sides and lots of discussions. However, China will do its best to help its friends."

While at the embassy, the Independent crew saw Mugabe's close security aides leaving, suggesting preparations for the visit are in full swing.

Lin said China had been assisting Zimbabwe for some time, adding the country had received amounts exceeding US$1 billion in preferential and concessionary loans to fund various projects, among them the National Defence College, Victoria Falls Airport upgrading and the Kariba South Power Station extension programme.

"Since 2010, Zimbabwe has also been given more than US$100 million in grants and interest-free loans," said Lin, adding this is more than any other African country has received "because we understand that Zimbabwe is faced with serious challenges and needs more help from its (Chinese) friend".

Lin also dispelled the notion China does consider Zimbabwe a serious economic partner -- a view generated by the fact Zimbabwe was omitted from the itinerary of both Chinese Prime Minister Li Kequiang and President Xi Jinping when they visited African countries in 2012 and 2013 respectively.

"Zimbabwe is an important partner of China which is why President Mugabe has been invited to visit this year. In any case, there are many high-level exchanges between these two countries and every year we receive Zimbabwean cabinet ministers while senior Chinese officials also come to Zimbabwe, like the visit of the Vice-Premier Wang Yang in 2012."

Government sources also said Mugabe will again visit China sometime next year, but this time in his capacity as Zanu PF leader in reciprocation to the recent visit by the CCP delegation.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: AllAfrica


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters