By Tinashe Kairiza and Melody Chikono
The African Development Bank (AfDB) says it is ready to extend up to US$50 million in loans this year to Zimbabwe’s private sector amid ongoing negotiations with the government to settle its US$600 million arrears to the lender before it can resume accessing fresh capital.
Though Zimbabwe’s external debt soared 3% to US$11,6 billion last year, AfDB has not withdrawn funding to the country’s private sector, extending US$25 million to the Central Africa Building Society (Cabs) earlier this year.
The loan facility extended to Cabs is meant for companies in various productive sectors of the economy to access long-term finance for retooling. Over the next three years, AfDB will extend grants estimated at US$223 million to the capital country — though public sector lending would only resume after Zimbabwe has extinguished its huge debt stock.
In an interview this week, AfDB country manager Damoni Kitabire said the continental finance house would avail between US$25 million and US$50 million to private partners with viable commercial projects in 2018, apart from the US$25 million availed to CABS.
“We are not giving loans to the public sector; we are giving loans to the private sector. We are now trying to see where else we can intervene,” Kitabire said.
“We are now scanning the (investment) environment now and we are looking at doing another US$25 million to US$50 million before the year ends, depending on whether we can find a viable project. The maximum we can commit this year is US$50 million.”
He said the loan facility was meant to trigger economic growth. As a result of the country’s volatile macro-economic environment, he said, the finance house would cushion itself from the potential risk arising from non-repayment by the private sector. “When we look and appraise the operations of the private sector, we are a little bit more vigorous. We are now making sure that we cover ourselves when we are dealing with the private sector,” said Kitabire.
Commenting on the forthcoming Africa Investment Forum, set to be held in South Africa in November, he said debt distressed countries like Zimbabwe should borrow to finance projects that can stimulate economic growth.
“Debt distressed countries should make sure that before they borrow, they are borrowing for the right project, for a project that is a big priority for the country,” he said, noting that loans should also finance the creation of jobs in Africa.
Zimbabwe’s unemployment rate is over 90%, according to the International Labour Organisation.
With Zimbabwe’s huge external debt accounting for about 80% of its gross domestic product, Harare is battling to attract fresh lines of credit to stimulate its fragile industrial base — a key step towards setting the weak economy on a firm recovery and growth path.
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