By Cris Chinaka
HARARE – Zimbabwe is trading its mineral wealth for foreign loans in a bid to ride out its economic crisis, but analysts say yields will be limited by lack of confidence in President Robert Mugabe’s government.
The southern African count
ry is in an economic spiral which many critics blame on Mugabe’s policies, leaving it facing chronic shortages of food and foreign currency to import essential commodities, including drugs and fuel.
Zimbabwe’s central bank on Tuesday signed a pact with a European bank for a US$50 million revolving fund to import fuel in a deal guaranteed by mineral exports from the country’s largest nickel producer, Bindura Nickel Corporation (BNC).
Reserve Bank of Zimbabwe Governor Gideon Gono, who signed the one-year pact with European bank BNP Paribas and South African financial institution Loita Capital Partners, said the deal could be replicated to secure more foreign loans to bolster an economy in its eighth year of recession.
“In the context of the National Economic Development Priority Programme we must try to leverage exports to allow Zimbabwe to access international finance,” Gono said.
“Zimbabwe has over 40 minerals and we should leverage these minerals, even if they are still in the ground, to get value,” he said, pointing at one of Harare’s latest drives to turn around an economy on a steep slide.
Gono did not say if the new deal was linked to an agreement that the West African petroleum producer Equatorial Guinea signed last week to supply Zimbabwe with fuel.
But political and economic analysts say Gono’s revelation that the US$50 million fuel facility deal had taken a year to clinch, and was still not enough to satisfy Zimbabwe’s needs, showed the country had a serious credibility problem.
“The idea of forward selling, of securing loans against promised commodities works well in an environment of trust but in our case, Zimbabwe does not enjoy that confidence,” said private economic consultant John Robertson.
“Zimbabwe’s credibility with the international community has suffered badly over lack of clear respect for property, over those problems in settling debt arrears with the IMF and over the recently announced plans to seize some shares in the mining sector,” said Robertson, a leading commentator.
“Against such a background, it is going to be difficult to clinch the necessary deals as fast as Zimbabwe needs bridging loans,” he added.
Political analyst Heneri Dzinotyiwei said while forward selling Zimbabwe’s mineral resources, including gold, platinum, nickel, coal, tin, copper and lithium, made economic sense, the world would be looking at the country’s mining capacity.
“The crisis is forcing them to look at all the possible solutions, potential business partners will be looking at capacity and also the risk highlighted by the international politics at play,” said Dzinotyiwei, a professor at Harare’s University of Zimbabwe.
Scores of mines have folded in the past five years under the weight of escalating production costs and raging inflation while frequent countrywide power cuts have also hit production.
Zimbabwe’s gross domestic product (GDP) has contracted by 40 percent since 1998. The World Bank says the country has the fastest shrinking economy outside a war zone, and its inflation is the highest in the world at more than 1,000 percent.
Many international donors, including the International Monetary Fund, have cut aid to Zimbabwe over Mugabe’s controversial political and economic policies, especially his seizures and distribution of white-owned farms to blacks.
The deepening economic turmoil has also raised government fears of popular unrest, with security forces stepping up action in recent weeks to ban protests and intimidate government critics. — Reuter