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Continue being transparent about debt situation, EAZ advises govt

THE Economics Association of Zambia has advised the government to continue being transparent about the debt situation and remedies that are being implemented to ensure debt remains sustainable despite the harsh global economic environment.

EAZ president Lubinda Haabazoka said the association was encouraged that the government had joined other countries in implementing measures aimed at cushioning the negative economic effects of COVID 19, among which was debt management.

“Earlier this year when our analysis had forecasted stress for economies around the world especially for emerging markets like ours, we called upon the Zambian government to immediately engage its global partners in the aim of suspending certain multilateral debt payments and negotiating for easing down conditions especially on commercial debt as practiced by similar countries,” he said in a statement. “As an association, we were delighted to see the Zambian government appoint Lazard Freres as financial advisor to help restructure its external debt as the practice is around the world for countries with bonds actively trading on the international capital markets. The move was positively received by the market.”

Dr Haabazoka assured the markets and citizens that the current solicitation to suspend coupon payments was part of the debt management strategy Zambia has embarked on with the help of Lazard and should not be treated as a default.

He said the public solicitation was part of the procedure any bond issuer had to go through in such circumstances.

“Should the bond holders refuse to suspend coupon payments, the Zambian government will still trade business as usual. We would also like to advise the public that in August 2020, the Zambian government applied for the G20 debt service suspension initiative and is also requesting for similar debt service suspension from its commercial creditors,” Dr Habazoka said.

He said Zambia was not the only emerging market undergoing the same procedure.

“We would like to advise the Zambian government to continue being transparent about the debt situation and remedies that are being implemented to ensure that debt remains sustainable despite the harsh global economic environment,” Dr Habazoka said. “We also call upon the general public to take keen interest in what is happening around debt management in Zambia but not to be speculative as issues to do with commercial debt or bond markets are highly sensitive to market information.”

He said the association would engage finance minister Bwalya Ng’andu in a public discussion to discuss among other things the 2021 budget and debt management.

The government has requested suspension of debt service payment for three Eurobonds for six months in view of the unbudgeted costs triggered by COVID-19.

Zambia issued three Eurobonds – US $750 million due in 2022, US $1 billion maturing in 2024 and US $1.25 billion payable between 2026 and 2027.

In a notice issued by Secretary to the Treasury Fredson Yamba on Tuesday, the government is requesting bondholders to suspend obligation payments covering three coupons due on October 14, 2020, January 30 and March 20, 2021.

“The Republic of Zambia is confronted with a very challenging macroeconomic and fiscal situation aggravated by the COVID-19 crisis that has severely affected the country’s public finances. A combination of declining revenues and increased unbudgeted costs caused by the COVID-19 pandemic have resulted in a material impact on the government’s available resources to make timely payments on its indebtedness leading to increasing debt servicing difficulties,” Yamba stated. “This is the reason why the Republic of Zambia has taken the decision to apply for the G20 Debt Service Suspension Initiative in August 2020 and is requesting similar debt service suspension from its commercial creditors, including its noteholders.”

He stated that the government, meanwhile, continues to actively engage the IMF to secure financial assistance within a programme of reforms that would help in stabilizing the macroeconomic outlook of the country and restoring its fiscal balance.

“In this context, the government is committed to finding a consensual and collaborative resolution to the debt sustainability issues it is currently facing,” stated Yamba. “The Ministry [of Finance] invites all holders of direct and guaranteed external commercial obligations of the Republic, including the Notes, to an Investor VIRTUAL PRESENTATION that will take place on 29 September 2020 at 12:30pm (London Time).”

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