By Prince Kurupati
In a statement recently released by South Africa’s National Treasury, the South African government declined a loan request from Zimbabwe to lend her $1.2 billion. South Africa’s National Treasury said the Zimbabwean government was looking to borrow the money as a rescue package following the country’s deteriorating economy.
The news site, Bloomberg states that the spokesman for the National Treasury, Jabulani Sikhakhane revealed the news to them in a phone interview. According to Bloomberg, Jabulani Sikhalane said that the Zimbabwean government approached the National Treasury on Boxing Day last year.
The request was however turned down as according to Jabulani Sikhalane “South Africa doesn’t have the money to provide that kind of assistance.”
Barely 14 months after coming into power, the Emmerson Mnangagwa led administration in Zimbabwe is facing crippling foreign-exchange and fuel shortages, strikes and a dearth of political leadership. Recently, the country experienced massive anti-fuel-price increase protest which according to several reports led to the death of 12 people after protesters had clashed with government security forces.
Zimbabwean officials have not yet commented.
While South Africa declined Zimbabwe’s loan request, reports have however emerged stating that South Africa is ready and willing to use its influence with the International Monetary Fund and World Bank to help broker a debt-clearance plan for Zimbabwe.
One of the main reasons which have made it difficult for Zimbabwe to address its foreign-exchange shortages is down to the country’s inability to borrow money from international monetary institutions chief among them the IMF and the World Bank. With South Africa willing to help, Zimbabwe will be able to negotiate a credible plan to clear arrears owed to the creditors to make the country eligible for fresh loans to revive its economy. According to several economists, reaching a mutual understanding with international lenders is the best pathway for Zimbabwe at the moment.
Zimbabwe’s Finance Minister Mthuli Ncube in October last year said that Zimbabwe’s total debt is about $16.9 billion. Arrears total $680 million with the African Development Bank, $1.3 billion outstanding with the World Bank and $308 million with the European Investment Bank.
At the moment, the Zimbabwean government can’t access fresh financing without an acceptable arrears-clearance plan.
South Africa and Zimbabwe have close links because many of the estimated four million Zimbabweans who were driven away by the economy’s collapse under former President Robert Mugabe live in South Africa. The two countries are also close trading partners with South Africa being Zimbabwe’s biggest trading partner in recent years while Zimbabwe is a ready market for most South African produced goods.