Uncovering Zimbabwe’s debt
4.2 The creation of bilateral debt
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In the early 2000s debt owed to other governments increased by one-third. It is likely that this was due to export credit agencies paying out on defaulted private debts, and then recharging the debt to Zimbabwe. Export credit agencies promote exports from their country by giving government backing to bank loans which are used to buy exports. For example, a multinational bank gives a loan to the Zimbabwean government to buy exports from a British company. The UK government export credit agency, the Export Credits Guarantee Department (ECGD), back the loan so that, if the Zimbabwean government stops making repayments, the UK government bails out the bank and charges the money to the Zimbabwean government.
The ECGD says Zimbabwe owes it £190 million (US$300 million).143 At least £90 million of this plus interest arrears originated between 2000 and 2004, with the Zimbabwean government defaulting on private bank loans used to pay for British exports to, amongst others, the Ministry of Finance, ZESA and the police force.144 For example, as of June 2011, Zimbabwe owed the UK government £20.9 million for loans to buy 1,500 British made Land Rovers and parts to be used by the Zimbabwean police. A further £5.9 million is owed on loans given to buy radar equipment from Siemens Plessey Electronics. The UK government has not revealed whether this was for civilian or military use. The UK government did not make any social impact analysis of these loans.145 Incredibly, the UK ECGD says that it “does not hold that information” when asked what debt repayments were made to it by Zimbabwe between 1990 and 1999.146 Furthermore, the UK ECGD says it cannot say what date the exports were first supported, and how much of the debt owed is principle and interest, because it would take more than three-and-a-half days for someone to find out from their files.147
Land Rovers on display at British motor festival, 2008. It is not known what make were sold to the Zimbabwean police.
4.3 Loans and repayments to the present day Whilst Zimbabwe has been in default on most of its loans to the west, it has continued to make some (but not all) repayments to the IMF, under threat of expulsion. Since 2000 Zimbabwe has paid the IMF US$300 million. This has tended to consist of a few million dollars a year, but in 2005 Zimbabwe made a one-off payment of $165 million, allegedly through raiding private foreign exchange accounts in Harare.148 In September 2011 the IMF said it “strongly encouraged Zimbabwe to make timely payments to the Fund and increase them as payment capacity improves”.149
Whilst western governments and multilateral institutions stopped lending to Zimbabwe in the 2000s, one key new lender has been China. One of the most contentious loans is the agreement on a Yuan640 million (US$100 million) loan agreed in 2011 to build a defence college (it is not known how much of this has been disbursed). Devaluation of the US dollar against the Yuan, a process that is only likely to continue, means the relative size of the loan for the Zimbabwean economy has already increased. The interest rate on this loan has reported to be between 2 and 5 per cent.
Uncovering Zimbabwe's Debt