China Demands Gold As Collateral For Zimbabwe Loans -- By Tyler Durden, Zero Hedge

China, as we noted here, is happy to provide the financing to turn Africa into Disneyland - Monorails and all - but there is one catch... the loans must be backed by gold as collateral. As The Source reports, China wants Zimbabwe to use its mineral proceeds to guarantee any future loans having already extended nearly $1.5 billion in the last three years to Harare’s ailing economy. Various minerals have been discussed to back the loans "but we feel gold is more stablee," Zimbabwe's Mines Minister noted. Of course, China is defending the demand, claiming "it’s in accordance with rules and regulations when granting any loan" and adding that "it doesn’t mean that we will use the collateral."

As The Source reports, Gold may be used as guarantees for existing, future loans...

China wants Zimbabwe to use its mineral proceeds to guarantee any future loans, a Chinese official said on Tuesday, adding that Beijing had already extended nearly $1,5 billion in the last three years to Harare’s ailing economy. In February, Finance Minister Patrick Chinamasa said the two countries were negotiating what he termed a comprehensive financial rescue package.

...

“We are discussing whether we can take proceeds of sales for some minerals as collateral for the loans,” said Han.

“The bank and the team from the ministry of finance are now working at a technical level on how they can set up such a mechanism, how much the collateral would be and how much loans they (Zimbabwe government) can get.”

In principle, the funding request and use of minerals as collateral has already been accepted, Han added.

He said Chinese loans to Zimbabwe were nearly $1,5 billion over the last three years – about 37 percent of the 2014 national budget at $4,1 billion – and that it was now burdensome for the government to repay.

China explains this is business as usual...

“We are asking for collateral because it’s in accordance with rules and regulations when granting any loan, but it doesn’t mean that we will use the collateral. This is the concept that we are now discussing with the Zimbabwe government,” said Han.

So not hollowing out another nation's reserves at all. But Zimbabwe adds...

“We have looked at gold and diamonds, which we are considering as part of the securitization,” Deputy Mines Minister Fred Moyo says in phone interview from capital, Harare.

Government may also consider using chrome, “but we feel gold is more stable,” Moyo says

But one has to wonder how likely it is that Zimbabwe will promptly repay billions of dollars of loans - given their track record - and what a great way for China to transform its excess USDs to Gold (and get paid interest while it waits).

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