China will cancel about $40 million worth of Zimbabwe’s debt due to mature this year and Harare hopes to facilitate use of the yuan currency in its economy as bilateral trade increases, the Southern African country’s finance minister recently. China has become the largest investor in Zimbabwe, which has been shunned by the West over its human rights record and is struggling to emerge from a deep 1999-2008 recession that forced the government to ditch its own currency in 2009.
Finance Minister Patrick Chinamasa said China and Zimbabwe were negotiating the final amount of debt to be cancelled. In the last five years, Zimbabwe has received more than $1 billion in low interest loans from China, which is Harare’s second largest trading partner after South Africa.
On a rare visit to Harare by a Chinese leader, President Xi Jinping last month witnessed the signing of 10 economic agreements, including a $1 billion loan to expand Zimbabwe’s largest thermal power plant, Chinamasa said.
Zimbabwe planned to increase local use of the yuan after the central bank last year added the Chinese currency to a basket of currencies used in Zimbabwe that includes the U.S. dollar, British sterling and the South African rand.
The International Monetary Fund (IMF) last year admitted the yuan into its benchmark currency basket, as recognition of Beijing as a global economic power. As a start, Chinese tourists could pay for services in yuan and Zimbabwe could use the currency to pay its loans to China. The central banks of the two countries are already negotiating on a yuan clearance system, stated the Finance Minister.