Chinese banks have indefinitely suspended funding for three infrastructure projects worth $1.3bn in Zimbabwe after its government withdrew $10m from an escrow account set up for the refurbishment of Robert Mugabe International Airport, the Zimbabwe Independent reports.
The decision to raid the account, which took place at the beginning of this year, has strained relations between Chinese banks and construction companies and their Zimbabwean partners, while exacerbating Chinese concerns about political risk and exchange rate volatility in the African country.
The suspended projects are the $1.1bn expansion of Hwange coal-fired power station, the $153m airport extension and the $71m NetOne telecoms expansion.
The three-year airport project, begun in 2018, was being undertaken by China Jiangsu International. It was to have modernised the airport, the country’s largest, and increased its capacity from 2.5 million to 6 million.
The funds from its capital account were seized by the government and converted into local currency by the Reserve Bank of Zimbabwe (RBZ), sources told the Independent.
The Hwange project, which was to have added 600MW to Zimbabwe’s biggest power plant was agreed in 2015 and the $1.1bn loan agreement with China’s Export-Import Bank was signed in June last year.
The withdrawal from the escrow account triggered complaints from Jiangsu International and Chinese diplomats, but the money has so far not been returned.
One unnamed official told the Independent: "Basically, what happened is that the RBZ raided the escrow account for the airport project and that move destroyed confidence and trust. There have been negotiations for the money to be returned but government is not being honourable enough. The Chinese were patient, but this happened at the beginning of the year and they have now run out of patience. Chinese financial institutions have taken the decision to cease funding the three projects."
The official added: "It’s a matter of principle, trust and confidence. How can you trust a pickpocket with your money?"
Image: Robert Mugabe International Airport in Harare (Dreamstime)