Zimbabwe discusses $2 billion China loan-newspaper
Source: Reuters
(adds analyst, background) By MacDonald Dzirutwe HARARE, Dec 22 (Reuters) - Zimbabwe has opened talks with China on a $2 billion loan as part of a bid to stabilise its economy, an official newspaper reported on Friday. Chris Mutsvangwa, Zimbabwe's ambassador to Beijing, was quoted by the official Herald newspaper as saying China had appointed a projects officer to open talks with Harare's finance minister and central bank governor. "China's government is ready to negotiate with the government for a $2 billion facility to fight inflation and other aspects of the economy," he said, without elaborating. Chinese officials could not immediately comment on the issue. Analysts doubted the country could repay such a facility. This would be the largest foreign loan for President Robert Mugabe's government, which is presiding over its worst economic crisis since independence from Britain in 1980. Zimbabwe is suffering shrinking gross domestic product, the highest inflation in the world, unemployment above 80 percent and shortages ranging from foreign currency to food. Mugabe denies charges that his policies have wrecked a once-thriving economy. He accuses Britain of leading a Western campaign to punish his government for its land reforms. Mutsvangwa was not available for comment while China's foreign ministry had no immediate comment. Analysts were wary, noting Mutsvangwa said last month that China Metalurgical Croup Corp had offered $3 billion for a 60 percent stake in struggling state-owned Zimbabwe Iron and Steel Company, which the Chinese firm denied. Shunned by key Western donors over his policies such as seizing white-owned farms for blacks, Mugabe has scrambled for aid and investment from the East. China is attracted to Zimbabwe's mineral resources such as uranium and platinum as it increasingly looks to Africa for raw materials to fuel its booming economy, a move that has raised fears of exploitation among activists and labour groups. Mugabe this week said the economy was turning a corner, adding his government had secured agreements with Chinese firms for joint-venture mining operations. He did not give details. But with exports falling as companies grapple with foreign currency shortages and high inflation, analysts and the International Monetary Fund say Harare has no capacity to repay debts and is likely to accrue huge arrears on any foreign loans. Zimbabwe has $2.2 billion arrears out of a total $4.1 billion external debt. "This is another pie in the sky at the moment," said Tony Hawkins, professor of business studies at the University of Zimbabwe. "This is a huge amount and if it were true Zimbabwe has no capacity to pay and will most probably have to trade some of its assets like minerals." Zimbabwe has previously said it was behind with payments for Chinese fighter jets it purchased last year. It has also bought small commercial planes, trucks and buses from China. In September the central bank unveiled a $200 million loan from China to help boost output in the key agriculture sector, whose demise critics blame on the land seizure drive, but analysts wondered what Zimbabwe had offered in return. "He (Mutsvangwa) said China's assistance to Zimbabwe would help dispel the myth perpetuated by the United States and Europe that the country's economy has collapsed beyond redemption," the Herald said.
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