China writes off interest-free loans given to Zimbabwe

China has written off an unspecified amount of Zimbabwe’s interest-free loans and pledged to help the Southern African country find a way out of its debt crisis

China has written off an unspecified amount of Zimbabwe’s interest-free loans and pledged to help the Southern African country find a way out of its debt crisis, even as activists warned of a permanent debt trap.

As of September 2023, Zimbabwe’s publicly guaranteed debt stood at $17.7 billion, of which $12.7 billion was external and $5 billion domestic.

Most of the foreign debt was purchased from China, as the country is ineligible for loans from multilateral creditors such as the World Bank and the International Monetary Fund (IMF) after defaulting on repayments since the turn of the millennium.

Since the fall of long-time ruler Robert Mugabe six years ago, Zimbabwe has been struggling to reach an agreement with creditors to restructure its unsustainable debt.

Former Mozambican president Joachim Chissano and African Development Bank President Dr Akinwumi Adesina are leading the debt restructuring dialogue, which suffered a blow last month when the United States withdrew its support, citing Harare’s reluctance to reform.

China, now Zimbabwe’s largest non-Paris Club creditor, says it is ready to help the country resolve its debt quagmire.

Some estimates put Zimbabwe’s debt to China at $3 billion.

“China attaches great importance to resolving Zimbabwe’s debt issues,” said China’s ambassador to Zimbabwe Zhou Ding. “China would like to enhance communication with the Zimbabwe government to work out proper statements through friendly consultation. As a concrete measure, China has cancelled Zimbabwe’s interest-free loans, which matured by the end of 2015.”

Mr Zhou did not disclose the amount of loans written off, but observers said it may not be much, as Zimbabwe increased its Chinese debt for infrastructure projects after the end of Mr Mugabe’s nearly four-decade rule.