(4 minutes read)
- Zambia’s new Finance Minister, Situmbeko Musokotwane, has underscored the need for entering into a lending programme with the International Monetary Fund (IMF) to give its creditors confidence
- It will also enable the government to access cheaper and longer financing
- Zambia became the continent’s first pandemic-era sovereign defaulter in November last year. It could not service its US$3billion in Eurobonds along with almost all its external debt
Zambia’s new Finance Minister, Situmbeko Musokotwane, has underscored the need for entering into a lending programme with the International Monetary Fund (IMF) to give its creditors confidence. It will also enable the government to access cheaper and longer financing.
Musokotwane was appointed finance minister by the recently elected President Hakainde Hichilema. He faces the daunting task of trying to pull the southern African country out of a protracted debt crisis. In an interview, the finance minister exuded optimism that he would get an IMF programme before the end of the year to retire a US$750million Eurobond due next year. But he said that he would not be able to pay the debt.
Zambia became the continent’s first pandemic-era sovereign defaulter in November last year. It could not service its US$3billion in Eurobonds along with almost all its external debt.
Musokotwane, a economist of repute previously served as finance minister from 2008 to 2011. He oversaw the implementation of Zambia’s last economic programme with the IMF that was concluded shortly before he was appointed to the post. He now faces the task of reviving an economy that shrank 3 percent last year. The country has a nearly US$13bn in foreign loans and has soaring inflation.
With the election of the new president, the country’s dollar bonds and Zambian kwacha currency have improved on hopes the new administration would bring a swift resolution to its debt woes. The copper prices are also looking up. An analysis into Zambia’s debt reveals that it has US$3bn is in Eurobonds, US$3.5bn as bilateral debt, US$2.1bn is owed to multilateral lending agencies and another $2.9bn is commercial bank debt. A good portion of debt, about a quarter, is held by either China or Chinese entities via deals shrouded in secrecy clauses. This makes negotiations for the IMF loans more difficult.
