EU Bank shelves private sector lending plans

HARARE - The European Investment Bank (EIB) has postponed plans to advance loans to the local financial sector after Zimbabwean banks told the lender that appetite for medium-term loans was presently low in the market, it has emerged.

European Union (EU) ambassador to Zimbabwe, Philippe van Damme on Friday told the businessdaily that while the EIB was prepared to advance money for medium-term on-lending to local banks, the financial institutions had pointed out that the move was presently unprofitable.

“The EIB board had given the green light for the bank to lend to the private sector with the entry point being the banking sector. So the arrangement was for medium-term lending credit for the informal sector and such…

“However, the problem is due to the macro-economic environment demand for this type of financing is low. So local banks turned down the offer and asked for the facility to be postponed until the economy improves,” van Damme said.

The EIB is owned by the 28 EU countries and borrows money on the capital markets and lends to both inside the EU and in neighbouring or developing countries.

An EIB delegation was in the country last week to meet with local bankers and map a way forward with regards to the lending facility following an EIB board resolution that it would extend technical and financial support to the country’s financial services sector.

Before approving the move the EIB board had acted on latest appraisal of the situation in the country regarding Zimbabwe’s economic conditions and had examined viable sectors in need of support.

Van Damme said the EU remained committed to lending to the private sector, but noted that government needed to address the deteriorating economy.

“The situation needs urgent addressing; we have been talking about this for some time to the relevant authorities and they assure us they are working on it,” he said.

Government  — which owes the lender over $280 million — is reportedly clearing its arrears to principal lenders after which it will then deal with other institutions owed.

“The Reserve Bank of Zimbabwe is working on a schedule to reimburse all the IFIs and after this is achieved, it will honour its dues to the EIB,” he said.

Van Damme was quick to point out that the country, saddled with over $7 billion debt, did not qualify for any direct funds from the bank as yet.

“We are pleased with Zimbabwe’s debt reform strategy and hope that next week’s discussions will go well. The bank is looking forward to working with the Zimbabwean private sector at the moment,” Van Damme said.

The prospect of an extension of credit facilities to the local financial services sector for on-lending to industry from the EIB comes after the European bloc lifted sanctions imposed on Zimbabwe 13 years ago on allegations of human rights abuses.

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