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Zimbabwe Leverages its Mineral Wealth to Establish Lines of Credit

The southern African nation’s reliance on its platinum resources to secure borrowing reflects the difficulty Zimbabwe faces in getting loans from international financiers, Bloomberg reported. In February, the government inked a $400 million loan agreement with Afreximbank for budgetary assistance and the funding of trade-related infrastructure. The funding agreement comes with a 10.2% interest rate and a six-year maturity period, with the borrowing cost surging to 12.2% if a default occurs. Repayment of the loan involves using 35% of Zimplats’ export proceeds, overseen by the Reserve Bank of Zimbabwe (RBZ). Zimbabwe’s Treasury said the Afreximbank loan was “a huge success” for the government, given that it has been shunned for more than two decades by international lenders, and has limited access to external finance, especially for budget support. Zimbabwe, burdened by $18 billion in debt, continues to face ineligibility for new lines of credit from multilateral lenders, including the World Bank, the International Monetary Fund, and the African Development Bank.

SOURCE: BUSINESS INSIDER