[You can’t tell me that Mugabe is growing stronger. It can’t be. His country is on skid-row and it will get even worse. Jan]

ZIMBABWE, whose international creditworthiness is currently in a shambles, might have played into China’s hands by tying itself to an ambitious loan service structure that commits 25 percent of exports to the Asian country.

Sources confided in The Financial Gazette this week that the loan service structure, still to be explained fully to the public, would require a quarter of Zimbabwe’s export receipts to go towards servicing loans advanced by China.

Technically, it may take several years for the country, ravaged by drought and plummeting foreign exchange earnings, to extinguish its current obligations with Chinese firms before it can even start on new loans.

“It might, therefore, take a number of years for us to fully pay off our existing debts before we can talk of new loans,” said the source.

A six-day visit to China by President Robert Mugabe and his entourage, which was, however, marred by a damning United Nations report on a controversial clean-up operation, saw the signing of several Memoranda of Understanding (MOUs) of which the finance cooperation agreement on exports was one of them.

Reports say apart from a 50 million yuan (about US$6 million) grant dished out to Zimbabwe to finance grain imports and 100 computers secured for local schools, the

The high-powered delegation largely returned empty-handed. Food agencies say 4.5 million people are in need of food aid that would cost the country US$420 million.

Trade between the two countries is currently tilted in favour of Zimbabwe with China’s export estimated at US$32 million against US$159 million in imports comprising mainly tobacco, the country’s single largest export earner.

Put simply, about US$40 million of export receipts would be applied towards debt servicing. Sources said Zimbabwe might need to step up exports to benefit from the world’s fastest growing economy that has of late become central to the country’s “Look East Policy.”

State-owned enterprises indebted to Chinese companies would also need to demonstrate commitment to executing their standing arrangements. The country, which faces expulsion from the International Monetary Fund if it fails to settle its arrears amounting to US$296 million, owes Chinese companies through the Zimbabwe Iron and Steel Company (ZISCO), the Zimbabwe Revenue Authority (ZIMRA) and Air Zimbabwe (AIRZIM).

ZIMRA bought two state-of-the-art scanners from Nutech to guard against the entry and exit of undeclared goods. Air Zimbabwe bought two aircraft while ZISCO borrowed US$35 million from the Export and Import Bank of China that was insured with China Export and Credit Insurance Corporation (Sinosure).

The loan was meant for the supply of equipment to refurbish ZISCO’s Blast Furnace Number 4.

Most of the loans were insured by Sinosure, which has of late expressed concern over Zimbabwe’s failure to adhere to its repayment schedules.

Source: AllAfrica.Com
URL: http://allafrica.com/stories/200508120600.htm…/p>