China Cancels Part of Zimbabwe's Debt as Country Grapples with Financial Crisis

Harare, Zimbabwe — In a significant move to aid Zimbabwe's debt-ridden economy, China has announced the cancellation of an unspecified portion of the country's interest-free loans.

This development is part of a broader effort by China to assist Zimbabwe in finding a resolution to its ongoing debt crisis. As of September 2023, Zimbabwe's total publicly guaranteed debt stood at $17.7 billion, with $12.7 billion external and $5 billion domestic.

Zimbabwe's reliance on China has grown as it remains cut off from traditional lending sources like the World Bank and the International Monetary Fund (IMF) due to longstanding defaults on repayments.

According to government data, Western countries and international financial institutions make up 70% of Zimbabwe's external debt, while obligations to China account for just 15%.

In August 2022, China extended 23 interest-free loans to 17 unnamed African countries, a move analysts interpreted as an attempt to deflect criticism of engaging in "debt-trap diplomacy."

Despite accusations that China uses its lending practices to gain political leverage and counter US influence in Africa, Beijing maintains that its relationships are based on a policy of non-interference in domestic affairs.

The Zimbabwe Coalition on Debt and Development (Zimcodd) highlighted that loan defaults from the era of former leader Robert Mugabe, combined with economic decline, have trapped Zimbabwe in a cycle of debt overhang.

High debt arrears have blocked access to concessional loan finance, leading predatory creditors to exploit the situation by expanding debt against the country’s natural resources and mineral revenues.

Last year, Zimbabwe secured a $400 million loan from Afreximbank, pledging 38% of its largest platinum miner's export earnings for repayment.

This followed a previous $200 million loan from China, secured against 26 million ounces of platinum reserves. Zimcodd warns that Zimbabwe is at risk of falling into a permanent debt overhang amid global challenges like climate change and shifting geopolitics.

“If left unresolved, the debt crisis will permanently trap Zimbabwe into a vicious debt trap of continuous borrowing, accumulation of arrears, and subsequent defaults,” stated Zimcodd.

This high indebtedness limits development, constrains access to affordable financing, and stifles economic growth, forcing Zimbabwe to choose between serving its people or servicing its debts.

Furthermore, China's financial engagement includes significant investments in Zimbabwe’s infrastructure, such as billions loaned for the upgrade of major international airports and the expansion of key thermal and hydroelectric power stations.