Zimbabwe and Botswana on Monday signed a 500 million pula loan agreement, with Gaborone indicating it could increase the size of the credit facility if Harare honoured agreed terms.
The loan, promised by Botswana in 2009, is intended to help Zimbabwe deal with an economic crisis which, among other things, wiped its currency out of circulation.
It will specifically finance working capital and re-equipment by the manufacturing sector, which is the hardest hit segment of Zimbabwe’s economy.
Speaking at the signing ceremony Monday, Zimbabwe’s Finance Minister Tendai Biti, said the credit facility would offer both short- and long-term capital to industry.
Zimbabwe, which is under Western sanctions over human rights worries, is finding it increasingly difficult to raise capital on the world markets. It has particularly been unable to raise long-term loans badly needed by industry.
“Short term funding will cover requirements of up to six months, particularly working capital, and the medium term facility will have a tenure of up to five years depending on financial needs,” Biti said of the Botswana loan facility.
“This represents a flexible facility that genuinely attempts to meet the varied needs of our industry,” he added.
His Botswana counterpart, Finance and Development Planning Minister, Kenneth Matambo, said Gaborone could increase the credit facility if Zimbabwe honoured the terms of the deal.
“All the commercial banks in Botswana have agreed to participate subject to the government of Botswana providing guarantees,” he said.
“The government of Zimbabwe also needs to quickly implement this to enable the loan facility to be drawn down,” said Matambo.