DEBT-RIDDEN Zimbabwe says it will look up to gold to plug funding gaps for the economy as the southern African nation remains ineligible to access long term capital from international financial institutions, Finance minister Mthuli Ncube said this week.
Official figures from Treasury show that the country remains in debt distress, with an unsustainable Public and Publicly Guaranteed (PPG) external debt overhang amounting to US$14.4 billion as at the end of December 2022.
The country has been unable to meet its debt servicing obligations and has, therefore, been accumulating external debt arrears since 2000.
Although Zimbabwe has settled arrears with the International Monetary Fund, the non-payment of arrears has made Zimbabwe ineligible from accessing funding institutions such as the World Bank, International Monetary Fund and the African Development Bank which enjoy preferred creditor status.
Speaking at the launch of the US$10 million gold facility, Ncube said the yellow metal would help Zimbabwe finance some of its key projects.
“It was in the 2022 National Budget Statement that I announced that Zimbabwe had been allocated US$958 million by the International Monetary Fund (IMF), as part of a General Allocation of US$650 billion that was released globally to all IMF member countries,” Ncube said.
“The mining sector has potential to generate foreign currency earnings and create jobs that will have a multiplier effect in growing the economy. The Gold Facility has the potential to close the funding gap and spearhead increased productivity, as well as finance bankable projects with a focus on the value addition. Such strategic deployment of resources will ensure that Zimbabwe’s Vision 2030 remains on course as we target a knowledge driven and industrialising upper middle-income society by 2030.”
Under the new gold facility, government will provider a USD$5 million Gold Service Centre Revolving Facility (GSCF) for the construction of 6 Gold Service Centres to improve access to critical facilities by Artisanal Gold Small-scale Miners (AGSM).
The remainder will finance the Artisanal Gold Small Scale Miners Facility (AGSMF) which will be accessed through the Mining Loan Fund (MLF) which is administered by the Ministry of Mines and Mining Development.
Experts say Zimbabwe’s mining sector is highly diversified, with close to 40 different minerals. The predominant minerals include platinum group metals (PGM), chrome, gold, coal, diamonds and lithium. The country boasts of the second-largest platinum deposit and high-grade chromium ores in the world, with approximately 2.8 billion tons of PGM and 10 billion tons of chromium ore.
The sector accounts for about 12 percent of the country’s gross domestic product (GDP).
According to the Reserve Bank of Zimbabwe statistics, the country’s total mineral exports increased from only US$889.1 million in the 2008, to US$5,085.43 million by 2021.
The exports grew by an annual average rate of 39.1 per cent for the period 2008 to 2021. Zimbabwe’s top mineral export, increased from US$1.2 billion in 2020 to US$1.7 billion in 2021 according to RBZ.
The RBZ attributed the 42 percent increase in 2021 to improved gold output and firm prices as global economies recovered from COVID-19 lockdowns.