Zimbabwe is using revenue from its platinum exports to pay off a $400 million loan from the African Export-Import Bank – Afrexim, as the debt-ridden nation taps its mineral wealth to open lines of credit.
The southern African nation’s dependence on its platinum resources to secure loans highlights the difficulty Zimbabwe faces in obtaining loans from international lenders. The country is saddled with $18 billion in debt and remains ineligible for new lines of credit from multilateral lenders, including the World Bank, International Monetary Fund and African Development Bank.
In February, the government signed a $400 million loan from Afreximbank for budget support and trade-related infrastructure financing, according to the latest public debt report prepared for lawmakers by Zimbabwe’s Treasury. The financing has an interest rate of 10.2% and a term of six years, with the cost of the loan increasing to 12.2% in case of default.
The country, endowed with vast mineral resources including gold and diamonds, last week introduced a new lithium tax and wealth tax to finance a nearly 14-fold increase in spending aimed at supporting the economy. The increase comes after the Zimbabwean dollar lost 89% of its value against the US currency this year, and annual inflation reached 176%.
On the other hand, Zimbabwe has dropped a plan to list a $200 million bond on its stock exchange in the resort town of Victoria Falls. In the latest debt report presented to lawmakers, Zimbabwe’s Treasury said the bond issuance on the Victoria Falls stock exchange was unsuccessful due to “limited appetite” for potential international underwriters.