President Edgar Lungu’s administration has accumulated massive debt in recent years, largely for large-scale infrastructure projects. The level of debt has now exploded to around $ 12 billion (or € 9.97 billion), half of which comes from private creditors. Result: Zambia became the first African country to default on its debt in November because of the coronavirus. The country had no other choice but to turn to the International Monetary Fund, with which it began discussions on Thursday with a view to obtaining payment facilities.
Zambia and IMF start talking
This southern African country, the continent’s second-largest copper producer, has already missed two deadlines in the past three months, as the coronavirus pandemic has caused its mining revenues to drop by nearly a third between February and April, according to the Chamber. national mining industry. And above all, the virtual discussions with the IMF, which are to be held until March 3, are being held in a particular context since presidential and legislative elections are scheduled for next August. Treasury Secretary Fredson Yamba said in January that they would focus on increasing social protection and supporting the agriculture and energy sectors. A deal with the IMF could result in a zero or very low rate loan to repay debt – much of it owned by Chinese companies – with technical support for economic reforms. But experts stress that Lusaka will need to be very transparent about its debt to get such a deal. Lungu’s administration already presented an economic stimulus plan in December. “We have not been honest” from this point of view, independent financial analyst Maambo Hamaundu told AFP. In 2016, the Zambian authorities made the same approach to the IMF for a $ 1.6 billion aid program, but this was unsuccessful, due to concerns about Zambia’s capacity to carry out reforms. economic. Today, would things be so different? Not sure on the side of analysts, who fear that in this election year government spending will skyrocket. Zambian Finance Minister Bwalya Ng’andu told the Bloomberg financial news agency last week that the government wanted a deal ahead of the August poll. “There is absolutely no will on our part to postpone after the elections, and we hope to be able to reach an agreement with the IMF. ”
A tight schedule before the elections
On all fronts, Zambia has already officially requested earlier this month the restructuring of its debt as part of the initiative proposed by the G20 to the poorest countries, promising on this occasion transparency and fair treatment of all its creditors. However, the exact details of the request were not disclosed. In November, the country failed to pay $ 42.5 million in interest on euro-denominated debt, becoming Africa’s largest economy in default during the health crisis. At the end of January, the country missed another maturity of $ 56.1 million on another bond issue. “Zambia is committed to transparency and fair treatment of all its creditors during the restructuring process and we hope that our request to benefit from the G20 initiative guarantees this to our creditors”, also indicated the Minister of Finance Bwalya Ng’andu in a statement. The G20, a group of the 20 largest economies in the world, agreed on a common framework to restructure the debt of poor countries with a moratorium on interest payments as part of the “Suspension of Service Initiative”. the debt ”.
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