Botswana’s government has denied reports that it will provide a $600m credit facility to debt-ridden Zimbabwe, dealing a new blow to President Emmerson Mnangagwa’s efforts to jump-start its ailing economy.

Zimbabwe is experiencing its worst economic crisis in a decade marked by high inflation, which peaked above 50% in January, and acute shortages of foreign currency. The country owes the World Bank $1.4bn, as well as African Development Bank and other international creditors. It is seeking financial bailouts from its Southern African Development Community neighbours as it is blacklisted by multilateral lenders including the World Bank and IMF. Its international debt stands at $10bn.

The southern African nation reportedly requested r $1.2bn in emergency credit from SA but was turned down.

In a statement to Business Day on Wednesday, Botswana’s permanent secretary Carter Morupisi denied that Botswana would provide the loan to Harare.

“The office of the president wishes to inform members of the public that the government of Republic of Botswana and the government of the Republic of Zimbabwe are currently holding discussions under the framework of the binational commission which covers a wide range of issues which are mutually beneficial to the people’s of the two countries.

“As such, media reports that are currently circulating about the line of credit worth $600m that the government of Botswana has committed itself to extend to the Republic of Zimbabwe are unfounded,” Morupisi said.

Botswana’s president, Mokgweetsi Masisi, is in Zimbabwe for talks. The two countries have elevated ties to the high-level binational commission following years of tense relations under former president Robert Mugabe who clashed with former head Ian Khama.

A statement would be released after the talks.

A senior government official told Business Day on the sidelines of the commission’s ministerial meeting on Wednesday that Zimbabwe had offered to mortgage its diamonds as security for the loan.

“The matter on the loan was first discussed between former Botswana president Ian Khama when President Mnangagwa visited Botswana in February last year,” the official, who cannot be named because he is not allowed to talk to the media, said. “Basically Zimbabwe wants a loan from Botswana and it has offered to send its diamonds to Botswana for processing so that these diamonds can be offered as security in the event that Harare does not pay.”

During his visit to Botswana last year, Mnangagwa said he wanted his country to start processing its diamonds at the Diamond Trading Company of Botswana.

“In Zimbabwe, yes we have diamonds, but we do not really have a diamond policy. We are now crafting the policy, discussing with Botswana, Namibia and Angola to assist us in formulating a diamond policy for Zimbabwe.”

The countries’ mines ministers had discussed bringing diamonds from Zimbabwe to be processed in Botswana, Mnangagwa said at the time.

Botswana’s minister of international affairs, Dr Unity Dow, said on Wednesday there has been a paradigm shift in relations between the two countries.

“We want to improve trade and investment … and all this should be beneficial to the ordinary people from the two countries,” Dow said.

Ministers from the two countries are on Thursday expected to sign eight bilateral agreements.