ACTIONAID Zambia says the Zambian government must re-engage bondholders and seek sustainable solutions to the country’s debt problem.
On Friday, creditors refused to accept the Zambian government’s proposal for a possible six-month suspension of interest payments on debts.
Finance minister Bwalya Ng’andu, on Sunday Interview programme on ZNBC TV, evasively confirmed that Zambia has defaulted on its Eurobond interest payment of US$42.5 million.
ActionAid Zambia executive director Nalucha Nganga Ziba expressed concerned with the latest developments.
She expressed concern over worsening credit ratings with dwindling prospects to attract future financing and consequences/penalties arising from this default.
She stated that Fitch ratings already downgraded Zambia to almost junk status after government sought to delay interest payments to bondholders in September this year.
Ziba added that as a developing country, Zambia needed to attract sustainable foreign investment, which responds to the economic needs of the country.
She, however, argued a poor credit rating would affect investor confidence and eventually lead to capital flight.
“This may further weaken the economy by the possible contraction of GDP as well as currency depreciation. We would therefore like to urge government to re-engage bondholders regarding the six months interest payment relief,” Ziba said in a statement on Wednesday.
“Our hope is that bondholders reconsider the status quo and demonstrate a measure of humanity and recognise the suffering that its actions will inflict on millions of Zambian women and children who are already living in poverty.”
She said vulnerable Zambians were the big losers in this case, “as government will further be handcuffed in providing any gender responsive public services due to the rejection by bondholders to grant Zambia a debt interest payment relief.”
Nganga-Ziba stated that ActionAid believed that debt relief would be necessary to ensure that the most vulnerable Zambians do not suffer the consequences of the country’s debt mismanagement amidst COVID-19.
“On the other hand, the Zambian government must also genuinely seek to address some of the issues and concerns raised by bondholders such as lack of transparency regarding Chinese loans and government not having a clear strategy on public debt management,” Nganga-Ziba stated.
“Chinese lending institutions, whether State-run or quasi-commercial, should clearly state how much they have lent to our government and the loan terms and conditions involved.”
She advised the Zambian government to be more transparent on its borrowings and finances and provide a clear strategy on public debt management which was key in assuring lenders the country’s commitment towards debt sustainability.
“More importantly, we would like to remind the government that inasmuch as seeking debt interest payment relief seems to be the only way to go for Zambia, …this is not enough,” stated Nganga-Ziba.
“Government should explore and pursue a more sustainable path of restoring fiscal discipline, commitment to good economic governance with zero tolerance to corruption.”