By Jeff Kapembwa
Lusaka - Zambia’s dwindling economic fortunes, coupled with bloated debts, have prompted stakeholders to seek the intervention of the International Monetary Fund for a US$1.3 billion bailout package or balance of payment support ahead of the Eurobond repayment due in two years.
Zambia’s staggering US$11 billion debt, including a 27% Chinese loan obligation, and an estimated US$3 billion owed to various foreign capital markets in Euro bonds among other creditors, have suffocated the country’s economy. Zambia’s currency value has declined to an all-time low, fetching US$1=16 Zambian kwacha.
This has prompted the IMF to seek, among other conditions, that Zambia attains debt sustainability before it could review the appeal for a financial bailout and assist straighten some of the challenges faced by the country.
Zambia’s imports have drastically declined in recent years, resulting in Gross International Reserves slowing down to a low of US$1.4 billion, double the amount accrued 10 years ago.
Edith Nawakwi, an opposition leader, argues that the debt distress for Zambia was alarming and a lasting the solution was inevitable to assist realign the economy, cast in a myriad of problems including the anticipated downturn in growth spurred by various fundamentals, and the coronavirus whose effects remain a threat to global growth, especially in Third World countries.
Nawakwi, a former finance minister in the Frederick Chiluba administration, argues that it was folly for the government to continue pretending that the economic downturn could change for the better.
This is amid mounting debts, currency depreciation and low exports against imports and against a rampaging coronavirus effect threatening global economies, hence the need to revert to IMF.
Featuring on a local radio programme, Nawakwi argued that despite Zambia having borrowing in excess of US$3 billion in Euro bonds, US$750 million secured in 2012 for revamping the national railway line was not invested.
The same applied to the US$1.5 billion secured in 2014 and another US$1.1 billion secured a year earlier meant for capital projects but all were diverted into other projects, yet all were due for servicing from 2022-2027, fueling concerns of Zambia defaulting.
“If we had invested this money in these projects, we would have been realising returns by now,” she said. “The Kafue Gorge project is almost coming on stream, but I’m sure even that is not from the Euro bond but Chinese money.”
Other economic commentators, reacting to IMF’s demand that it would be ready to finance Zambia if the country attained debt sustainability, urged the government to be bold enough and raise money to meet various obligations, including paying local debts owed to the private sector through Treasury Bills borrowing, coupled with major projects being undertaken by foreign contractors who are in turn externalizing the profits, hence locals being crowded out.
However, Bwalya Ng’andu, the Finance Minister, while admitting that infrastructural programmes being undertaken at the expense of other pressing needs cost the country’s reserves hence the urgent need for IMF’s intervention.
“The elevated expenditure on infrastructure development has been financed through borrowing and hence the prevailing high debt service payments and stock of debt,” he said.