By Amb. Emmanuel Mwamba
Celebrating Debt contraction, debt restructure, sale of Mopani and KCM
I’ve always wondered why we celebrate what should normally cause us to worry.
● We celebrated when Zambia issued its debut 10-year Eurobond of US$750 million international sovereign bond on 13th September, 2012.
● We celebrate the sale of KCM & Mopani, assets that should bring billions of dollars and must be key to developing the country.
● We celebrated when IMF signaled its Staff-level agreement of a $1.3 bail-out loan.
● We celebrated the reschedule of debt from paying for it now to paying for it in twenty years time.
Key Points on Debt Reschedule
1. In 2010, Zambia attained the lower middle income status. The IMF shepherded 12 African countries to the Eurobond and commercial markets. IMF stated that the environment was conducive for African nations to tap into the international debt markets as an alternative funding source away from foreign aid and multilateral institutions. So the IMF must not escape this blame. Ask Dr. Situmbeko Musokotwane.
●In its first tranche,Zambia obtained $750m while Kenya ($1 billion), Ghana ($3 billion), Benin (€1 billion), Senegal (€0.8 billion), Ivory Coast (€0.85 billion), and Cameroon (€0.7 billion) all obtained this new form of development financing. Before this only South Africa and Seychelles had obtained Eurobonds in 2007.
● China also came on the scene with project and infrastructure financing under the Belt and Road Initiative. Zambia, Tanzania, Ethiopia, Ghana, Egypt among others benefitted from these new loans from China.
● After the debt sustainabilty analysis conducted in 2017/2018 tvat established that Zambia was debt distressed, the PF pursued the restructure of Chinese loans under bilateral arrangements.
Infact a few loans such as the $90million Levy Mwanawasa stadium were written off. PF hired Lazard Feres from France, who have been key negotiators under UPND debt restructure negotiations program, to handle the Eurobond and other commercial creditors.
● the UPND have missed an opportunity to get debt write-off or debt forgiveness from China with the approach they took through the IMF and G20 Framework. The key principle here is the uniform treatment of debt and creditors. Eurobond holders and others would never agree to a debt write-off.
● Under the agreements on the debt reschedule, the debt has just been rescheduled to 12-20 years.
The problem has NOT gone away. It has been pushed to another, a future government.
● Government has to begin servicing its debt since December 2020.
Infact that financial outlay has been taken away.
● Under this new agreement, Eurobond holders have to receive $187million now.
Any default takes the country to original status.
● $800million- In 3 years only, Zambia has accumulated interest service arreas on the Eurobond alone of $800million. How much interest has Zambia paid in the last 10 years on its $3billion debt?