Biti Asks Finance Minister About Zimbabwe's Payment Of US$52 Billion To China To Repay US$200 Million Loan
Harare East Member of Parliament, Tendai Biti has quizzed Finance and Economic Development Minister, Professor Mthuli Ncube about how Zimbabwe is paying “US$52 billion to China” to repay a US$500 million loan.
The loan was acquired in October 2006 to purchase farm and agricultural equipment. Ncube said the loan was collateralised with mining rights to the tune of 26 million ounces of platinum resources in Selous which were owned by the Government through the Zimbabwe Mining Development (ZMDC).
He added that the loan is currently in arrears amounting to US$172 million. But Biti, a former Minister of Finance during the Government of National Unity (GNU) suggested that the money could be more. He said on Wednesday:
[The government negotiated] a loan from China of US$200 million to purchase farm mechanisation equipment. But you say that this loan was collateralised by Platinum – 26 million ounces.If you do your rough mathematics, assuming the price of platinum an ounce is US$2 000, you’re talking of 26 million ounces which will give you US$52 Billion honourable minister.So how is it possible that the government of Zimbabwe can borrow US$200m from China and give [China] an asset which in gross terms is US$52 billion?
Some context:
i). An ounce is equivalent to 28 grams.
ii). The price of platinum today is around US$900 an ounce, so the collateral is actually worth about US$23.5 Billion, which is still a huge amount for a $200m loan.
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iii). Zimbabwe’s national budget is around US$4 billion which means the country would take about 6 years to raise the money, without using it if it has to repay the loan.
iv). Collateral should be above loan value and possibly loan value plus interest. But by how much?
v). Zimbabwe is a high risk borrower, known for defaulting payment of debts, and that takes away its bargaining power during collateral negotiations. We don’t know to what extent.
There have been concerns over the government’s “mega deals” and “free gifts” from foreign governments, which critics say are being bought by the country’s natural resources such as land, gold, platinum, diamonds and lithium.
