China comes to Zim's rescue
2006-09-14 15:39
Harare - President Robert Mugabe has grabbed a huge financial lifeline from China to boost Zimbabwe's ailing economy but analysts wonder what the country had to offer in exchange for the loan.
Reserve Bank of Zimbabwe Governor Gideon Gono, tasked to turn around an economy in recession for the last eight years, on
Wednesday announced a $200m facility from China as part of nearly half a billion dollars worth of mainly foreign loans.
The facility would be the first major external loan extended to the southern African nation since its isolation from former Western donors amid charges of election rigging and over Harare's seizure of white-owned farms to resettle blacks.
"My main question that has not been answered is what are we giving China in exchange for that loan," said Eric Bloch, a Bulawayo based economist.
Trying to gain foothold
"The money is coming from a Chinese government body and not the private sector but hopefully it will give a sense of confidence to other entities in that country to do business with us," said Bloch.
Gono said on Wednesday Zimbabwe had met "conditions" for the
Chinese loan but declined to say what they were.
Shunned by the West and slammed by opponents for plunging the country into its worst crisis since independence in 1980, Mugabe has been forced to scramble for aid from the East.
The crisis has left Zimbabwe with severe foreign currency shortages and the world's highest inflation at nearly 1 000%, making the local dollar a pariah on international markets, while poverty levels increase.
China has been trying to gain a foothold in Zimbabwe's key mining sector to explore the country's vast mineral reserves.
"All weather friend"
Zimbabwe has in the past year bought 12 military jets and several trucks from China and last month Mugabe said the defence forces was learning new military strategies from Beijing.
"China is an all-weather friend and our relations are growing from strength to strength," Deputy Finance Minister David Chapfika told Reuters.
"This is the beginning of greater things to come under our look-east policy," he added.
Critics accuse China, which is vigorously pursuing sources of energy and raw materials for its booming economy, of dealing with governments that violate human rights, including Zimbabwe.
Analysts said Zimbabwe, which has defaulted on its foreign loan repayments with Western donors in the past and has also fallen into arrears on payments for the military jets, would have to meet set conditions to secure future funding.
Equal partners
"China can afford to gamble $200m to see the opportunities that can come its way but future loans will only come if we meet terms for this facility because even China cannot give us free money," said Bloch.
Local industrialists complain that the manufacturing sector, especially the textile industry, has been hit by "Zhing-Zhongs", a term given to cheap Chinese imports, while no investments have been seen.
Mugabe denies mismanaging the once promising economy, which he says is now on a recovery path thanks to the "look east" policy.
"We have been unfairly treated by the West for political reasons but with China our relationship has been consistent and they treat us as equal partners," Chapfika said.