Economic belt tightening and the sliding kwacha are forcing renewed calls for the government to rethink plans to borrow $103 million from an overseas bank to settle debt owed to a Chinese company on behalf of a foreign investor.
The opportunity to shelve the foreign exchange loan came as the new Bank of Zambia Governor Denny Kalyalya was sworn in this week by President Edgar Lungu, who urged the Governor to find a quick solution to the depreciation of the kwacha, which is trading at record lows.
Sources this week said that signing of the Chinese loan agreement was imminent, but that the faltering economy was likely to prompt a reconsideration of the plan, which has been called into question by Transparency International.
The well-respected non-governmental organisation has called for finalisation of the loan to be postponed pending further assessment.
Finance Minister Hon. Alexander Chikwanda got tentative approval in principle for the loan from the previous Cabinet in November, according to reports, less than a week after President Michael Sata’s funeral.
The loan from the Export-Import Bank of China was earmarked to settle a debt to Chinese telecom firm ZTE for work for Zamtel while the latter was run by Libyan telecom company LAP GreenN.
Since the loan proposal came to light there have been calls for it to be stopped amid concerns that such large borrowing by the nation would be unwise.
“In the context of renewed economic problems, the loan now seems increasingly unlikely to be signed, and financial commentators expect the proposal to be quietly shelved,” said a financial expert, who did not want to be named.
“As the kwacha continues to depreciate the Zambian government can no longer afford to burden taxpayers with this enormous debt in order to settle a debt incurred by a foreign investor whose original attempt to takeover Zamtel was itself deemed unlawful,” he said.
Approval of the loan from China in the current economic climate would have profound implications for Zambia’s image on the international stage, risking long-lasting damage to its carefully built image as an investor-friendly destination.
By John Banda – freelance journalist