The Ministry of Finance and Economic Development has published the terms of the US$1,4 billion loans the country secured from African Export and Import Bank (Afreximbank) since 2017 for strategic imports and local currency support.
The publication of terms and conditions for all public loans, is a requirement in terms of Section 300 (3) of the Constitution of Zimbabwe, which is fully provided for under the Public Finance Management Act.
Harare obtained the loans, totalling US$1,4 billion over the 36 months on three different occasions and in varying amounts; US$600 million in 2017, US$500 million in 2018 and US$300 million in 2019.
The Southern African country has regularly imported key commodities such as maize (especially during drought years), wheat and fuel, at a time its own resources did not suffice to procure such.
The country has experienced some drought in the past seasons that compelled Government to secure resources elsewhere.
The Government, acting through the Ministry of Finance and Economic Development, guaranteed the loans, which were concluded by the Reserve Bank of Zimbabwe (RBZ) with the Afreximbank.
The last loan was for US$300 million, concluded in December 2019 for a tenure of 60 months and subject to LIBOR (London Interbank Offer Rate) plus 6,5 percent and commitment fee of 2 percent per annum on outstanding principal.
Annual management fee for the loan was pegged at 1,25 percent per annum, while the arrangement fee was a one off payment of 1,25 percent.
The US$500 million loan, concluded in May 2019, is liable to 1,12 percent annual management fee, advisory fee of 1,25 percent of total commitments, participation fee of 1,25 percent as well as 0,5 percent standby letter of credit fee.
According to the notice published by the Minister of Finance and Economic Development recently, this loan facility was meant for strategic imports and prospective currency reforms.
The loan, spread over 48 months, was meant for financing strategic commodity imports.
The first loan, US$600 million, was for a period of three years with the tranches A and B being subject to interest of LIBOR plus 6,5 percent per annum, 1,25 percent management fee and draw down fee of 0,5 percent of the amount advanced to the borrower.
The facility fee shall be a once off payment of US$12 million with the funds earmarked for procurement of strategic commodities.
While there has been criticism from certain quarters over aspects of and justification for the loans, in light of Zimbabwe’s debt situation, the country regularly needed a hand from a trusted lender.
And Afreximbank has been one of very few global lenders to stand by and support Zimbabwe financially at a time the economy lacked reserves and domestic means to support critical requirements.
Zimbabwe has not had commercial relations with global lenders such as the International Monetary Fund, World Bank and African Development Bank over outstanding arrears, which accumulated when the economy went into a tailspin at the turn of the century.