Zimbabwe and China sign currency swap deal

Zimbabwe and China have signed a currency swap deal in a move expected to bolster trade between the two countries, after a visit by Chinese foreign affairs minister Wang Yi to Harare.

To promote international use of the yuan, China has signed currency swap agreements with more than 20 countries around the world, including SA.

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.

Wang, who was on a five-nation tour to Africa, ended his visit in Zimbabwe this week with the two countries agreeing to enhance trade and economic co-operation.

Zimbabwe relies heavily on China to fund its main infrastructure projects as the country does not qualify for funding from international financial institutions due to its debts.

China is funding projects worth more than $2bn (about R29bn) in Zimbabwe, including expansion of the country’s main power plant, refurbishment of the central airport, and construction of a new parliament building for a planned new city on the outskirts of Harare.

At the end of Wang’s visit, Zimbabwe finance minister Mthuli Ncube said a currency swap would boost trade between the two countries.

Ncube said the currency swap would help his government strengthen its capacity to honour its liabilities to China.

Harare-based economist John Robertson said the currency swap would favour Zimbabwe.

“It looks like it’s a way of seeking to borrow more money from the Chinese,” he said.

“Zimbabwe’s currency is very unstable and is not recognised anywhere except locally so it is Zimbabwe that is going to benefit more.” 

Other African countries, apart from SA, that have a currency swap with China, include Nigeria and Ghana.

In his remarks at the end of his visit to Africa soon after meeting President Emmerson Mnangagwa, Wang said the volume of trade between China and Africa had exceeded $200bn (R2.87bn) last year.

Wang also castigated critics of China’s relations with Africa, saying Beijing was sincere in its partnership with the continent.

“We have always insisted on non-interference in internal affairs, no political conditions, and never forcing others to do anything difficult, and we have always paid attention to listening to the voices of Africa, respected Africa’s will and have been in line with Africa’s needs.”

Wang also visited Egypt, Djibouti, Eritrea, and Burundi.