HAKAINDE Hichilema has said Zambia has been driven into a debt hole by the PF with no tangible future investments after much fought-for debt relief. Finance minister Margaret Mwanakatwe a couple of days ago disclosed that Zambia’s external debt has exceeded $9 billion, but it is believed the country’s foreign liabilities are well around or over $20 billion.
So far, Zambia’s Eurobonds are the world’s worst sovereign bonds, reports Bloomberg, raising further doubts of the government’s capacity to service the debt. And Africa Confidential has reported in its latest issue of June 1 that the uncontrolled borrowing by President Edgar Lungu’s government is growing too large to cover up.
It notes that while Zambia’s debt is growing, international reserves keep falling, now standing at $1.8 billion as at February.
Africa Confidential asserts that the Bank of Zambia’s late release of data on foreign reserves is a result of its hesitancy to admit how low they are when it should be restoring confidence in the economy.
“In mid-May the Bank of Zambia updated its data on its foreign exchange reserves, which had dropped to a historic low in January, falling between $2bn. The bank is late with its data, prompting suspicions that it does not want to admit how low they are at a time when it needs to be restoring market confidence. The latest charts not only show that reserves fell to $1.8 bn in February but also revived the January figure to include an additional $10mn in debt service payment for reserves,” it stated.
And Hichilema, the UPND president, said yesterday that it was unbelievable that Zambia was back into a debt trap within a few years of the PF’s rule.
“Imagine that after achieving the much fought-for debt relief at great cost to citizens, PF has in just a few years driven our country into a worse debt hole/trap of US$17 to 20 billion with no tangible investments (for future revenues or returns) to show for it!” Hichilema remarked.
He said citizens had been thrown into suffering owing to unending appetite for debt by the current government.
“The whole Zambian population of 17 million plus citizens (women and children) have been condemned into perpetual poverty because of the greed and corruption of the few in PF. What a tragedy,” Hichilema said. “Their preoccupation is acquiring these loans at a very high cost to the country and its citizens to get kickbacks. There’s nothing else that is driving these people into getting huge loans even when they know we have no capacity to pay back than the fact that they are the biggest beneficiaries. Most of this money is going into their pockets. The Financial Intelligence Centre (in its report released on Thursday) has shown us how they do this.”
He has advised Zambians to act now and stop further accumulation of debt by the government.
“We Zambians have no choice but to come together and unite to rescue our country from total destruction. Time to act together is now,” said Hichilema.
The Africa Confidential report has further catalogued some payments made by the government towards Eurobonds.
“The $50 million paid out for ‘other’ government uses in January is likely to represent an instalment of the $380 mn. the London High Court ruled was owed to Libya’s Lap Green. Bank of Zambia data does not go beyond February, but AC understands that the government also used a further $43mn from the reserves to pay another tranche of Eurobond interest in April,” the AC stated.
“The next payment of $56m is due in July. The dwindling reserves still appear to be the only source of funds for this, exacerbating concern among inverters in the Zambia’s Eurobond… In the week beginning 21 May, the kwacha began losing value again and its now at $10.30 to the US dollar. The weaker currency will only make Zambia’s already unsustainable debt service payment more expensive.”
It states that finance minister Margaret Mwanakatwe has failed to yield confidence before the InteeationInternational Monetary Fund (IMF).
“Last year, investors still believed there was a chance of IMF finance, though many Zambians realised Lungu would not stop borrowing and so scotch any chance of a programme.
Relations between the Ministry of Finance broke down and remain tense. Finance minister Margaret Mwanakatwe appointed in February, has failed to establish a rapport with the Fund, insiders say. Experts say an IMF programme and a loan to support balance of payment are essential. But the IMF wants Zambia to show that it will stop borrowing and get debt on a stable path. This requires tough decisions, cancellation of major projects and and strict fiscal discipline, which do not appeal to Lungu, especially as his eye is on the 2021 election.
Finance ministry insiders say the gap between the IMF’s view and the government’s is too wide for the programme to be possible this year,” stated the AC. “The Fund’s next mission is not until September, which is far off, given the urgency of the country’s problems. Mwanakatwe is trying to persuade officials to visit in June, the month before the $56 mn tranche of payments on Eurobonds is due. But it is Zambia that has to make the first move, by sending a strong signal to IMF that it will stop borrowing. This will entail unraveling contracted but not yet disbursed loans and is no simple task. Much of the now $9.1 bn. debt stock consists of the Eurobonds, Paris Club obligations and concessional lending from international financial institutions. So far, little of the roughly $8 bn of contracted Chinese project’s finance has been included, yet many large projects are well underway, including almost $800mn worth of airports (and) road projects amounting to further billions of dollars.”