Zim Finance Minister defends China currency swap deal

Ndakaziva Majaka

ZIMBABWE’S currency swap deal with China is will help Harare service its over USD1,8 billion debt to Beijing, Finance minister Mthuli Ncube has said.

Speaking to ZTN Ncube shot down arguments that the deal would short-change Zimbabwe and leave the country in a debt trap.

 “I have noticed that there have been some very colourful comments of the currency swap that we did with China.  Actually this is a solution for Zimbabwe.

“Zimbabwe owes Chinese companies monies for projects that Chinese investors have undertaken here. There are certain remittances and payments we should have made because we borrowed through various institutions in China. So the arrangement is simply designed to solve that,” the minister said.

To promote international use of the RMB (Yuan), China has signed currency swap agreements with more than 20 countries around the world including Japan and South Africa.

A currency swap involves the exchange of money in one currency for the same in another currency, and companies doing business abroad often use it to get more favourable loan rates.

Minister Ncube said he was open to getting into other currency swap agreements with other countries owed by Zimbabwe.

“For any new investment into the country, whatever we were supposed to receive in RMB / USD then pays out those who are exiting or we use that to make the payments that we owe. The inflows pay the outflows.

“It’s actually a solution and we can do that with any country that we owe money… In fact, I would like us to explore that with other countries as well,” the former African Development Bank Vice President said.

Ncube’s statement comes as market watchers have criticising government for getting into the currency swap deal arguing that with trade imbalance tilted against Zimbabwe, the deal would mean China will now spend less foreign exchange in Zimbabwe and use the local currency for transactions.

However, Ncube said he was grateful to the Chinese government and investors for accepting the currency swap deal.