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Zambian Government debt has risen by 176 percent since 2011, and analysts say that the state does not have the means to repay it.

Documents from the Ministry of Finance shows that Zambia’s total public debt is $9.75 billion dollars. This debt is made up to $6.05 billion external debt and $3.7 billion domestic debt. The total public debt has increased from $3.5 billion in 2011 to about $9.75 billion today, an increase of 176 percent.

Zambia has three outstanding Eurobonds, the first for $750 million issued in April of 2012, the second for $1 billion issued in June 2014, and the third issued in July 2015 for $1.25 billion.

But the country will struggle to pay the interest on these bonds, according to the Zambia Institute for Policy Analysis and Research (ZIPAR), which estimates annual interest on the bonds at $240 million. The amount required to service interest and repay the principal is about $440 million annually, according to the institute.

Because the Eurobond debt is in dollars, the government will have to pay considerably more in the weak kwacha which it earns – the Zambian currency has lost about 30 percent against the dollar in 2015.

without a change in policy, government debt is likely to rise to over 50 percent of GDP by 2018, from 30 percent of GDP in 2013.


But this is not the only portion of the debt that poses challenges for repayment, according to Economic Association of Zambia (EAZ) President Chrispin Mphuka.

“It is most likely, the Zambian government in its current form will not be able to raise the outstanding debt contracted to our Chinese lenders. The government will have to contract more debts to settle these loans,” Mphuka said in an interview with Anadolu Agency on Wednesday.

According to Mphuka, there is a shortfall of $642 million in the funds provisioned to completely settle the over $3 billion debt the Zambian government owes to China.

“The economic slowdown resulting from depressed commodity prices and low productivity has put the Zambian government under serious financial stress, and revenue collection has not only been compromised, but significantly reduced,” Mphuka explained.

The loans from China are intended to finance infrastructure projects.

But economist, and opposition Rainbow party official Cosmos Musumali told Anadolu Agency in an interview on Tuesday that the funds will have to be used to finance Zambia’s fiscal deficit.

That deficit is a threat, said Public Sector Development Association President Yusuf Dodia in an interview with Anadolu Agency on Wednesday.

“Unless action is taken to sharply reduce the deficit, there is a high risk of debt once again rising to unsustainable levels,” Dodia said.

He said that there is no monitoring mechanism to check how much the government is borrowing and repaying. According to the Auditor General’s report at the end of last year, some old debts contracted on the capital markets in 2012 have not yet been serviced, Dodia noted.

A study carried out by the Jesuit Center for Theological Reflection (JCTR) in 2014 revealed that government debt contracted between 2012 and 2013 was spent servicing loans made between 2003 and 2005.

The government may need all its funds to service outstanding debt, and will thus not have more to service infrastructure and government programs, the report said.

Dodia said that, without a change in policy, government debt is likely to rise to over 50 percent of GDP by 2018, from 30 percent of GDP in 2013.

By Francis Maingalia

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38 COMMENTS

  1. PF and ZANU PF of Zimbabwe are the most arrogant governments Africa has ever seen. These debts will be repaid not by Chagwa and his ministers but by you and I whether we like it or not through PAYE. Its more money in our pockets tulelapila. Let’s vote wisely this year

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    • PF worshippers, come out of the woodwork and explain how you will get our country out of this mess. Even though we want to run away from this but kabotolo Lungu is the ultimate custodian of the Zambian economy and needs to take responsibility for this poor and detrimental performance

      Meanwhile Aleisa HH

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  2. The Zambian Economy is estimated at above 32 Billion USD in real GDP terms hence the repayment will be a challenge but not a impossible or daunting task. The economy is still stable enough to mobilize the financial resources and pay back both the principal and interest amounts. The aspect the writer has not bought out is the time frames involved for the repayments which is critical in assessing Debt sustainability for developing country like Zambia. The local debt has bearing on interest rates ”Crowding out effect” while the external debt reduces the financial resources available through debt repayments. Since our available resources are insufficient we need debt for developmental project. its and egg and a chicken puzzle.

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  3. performance of any govt should based on such info….and not on infrastructure…..like what would happen in a personal capacity when you borrow money from banks to build a mansion just to please your family….especially your so that she does not leave you…..soon the banks will be in courts to repossess the mansion when you are in such a red…..luckily for a country there is no such thing like repossessing the roads or bridges etc but there is always a bitter and harsh way of paying back the loans….ordinary citizens being hit the hardest….borrowing to build infrastructure just to please electorates not to abandon you is a wrong approach to good governance….

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    • @ Scrutinizerer i like your little understanding of who an economy operates. The building of infrastructure is not meant just to please electorates only! Infrastructure development reduces the cost of doing business (Roads etc) further augmenting investor confidence in the economy. In the area of Health and education it ultimately reduces illiteracy and death rates while empowering citizens. Infrastructure development is key to economic growth as it has a catalytic effect, spanning Inclusive economic growth which is crucial to sustainable national development. The only catch is are we managing debt contraction well.

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    • Scrutinizer, get your facts straight! There are plenty of ways lenders can “repossess” to collect outstanding debt.

      Ask Zimbabwe. Their properties in other countries have been seized by court order and sold. Their National Airline planes have been grabbed. Payments for exports have been frozen and given to creditors.

      But the biggest problem will be “structural adjustment” which means your Government is so incompetent it cannot manage its finances and gives up sovereignty (independence) to get more loans to survive.

      Which is where KK, UNIP and Chilkwanda took us once before and we are going AGAIN! But this time NO HIPC DEBT RELIEF AVAILABLE.

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    • And just imagine these PFOOLS wanted to start an Airline!!! Buy airplanes!! Hahahahaha!

      As soon as the Eurobond comes due for repayment and we fail to pay, they would be grounded on their first landing outside of Zambia and then SOLD to recover the money – plus interest!

      End of PF “National Airline”!!!!

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    • @the economist…
      …im with my bro…we need these infrastructures but definitely not at ‘any cost’…
      @hungry.starving….we are on the same page…that why I concluded by saying…ordinary citizens are the ones who will suffer the most as a consequence of these debts…thanx

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  4. And the roads forever in PF until forever we will borrow to complete the roads forever and ever……..It happens globally….

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  5. I like the rate at which PF government is borrowing to improve infrastructure. It is better to continuously borrow for developmental projects than to worry over debts with no activity.

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    • The resource envelope is limited and insufficient for a developing country like Zambia, we need to supplement through debt contraction for developmental project otherwise no infrastructural development. What should will go for, development comes with a cost, equally so lack of development is depressing. It’s an egg and a chicken puzzle. The only catch in my view is how well are we managing debt contraction. The Government has put up a sinking fund, announced austerity measures and on the long term encouraging economic diversification.

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  6. The Zambian government is addressing this issues though not enough, is being done. The creation of a sinking fund is a sure way to address the aspect of debt repayment without defaulting. Secondly the austerity measures announced by the President, late last year will entail that the debt does not increase any further. Thirdly the diversification of Zambia’s mono-economy which is a long term measure and guaranteed for exchange rate stability in turn arresting the raise in external debt. One would have hoped for more austerity measures reminiscent of the ones the Tanzanian President is implementing.

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  7. Borrowing for infrastructure development is fine but those infrastructures should stand the test of time to recoup on the borrowed money.Currently,our roads though recently made are of poor standard and will require resurfacing in the next few years. Meaning more borrowing.

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    • It is called THE DEBT TRAP for a reason!

      And this dull PF Government has walked right into it, ignorant or blind or just too dull and greedy to understand the consequences! Borrow, borrow, borrow and spend like we will never have to pay anything back! What did he say?

      “Cost implications wont deter new Constitution Implementation”-President Lungu.

      ANYTHING being implemented COSTS MONEY! Is this man too dull to understand this basic FACT???

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    • But surely if better roads were made, it would mean more borrowing hence bigger debt? You get what you can pay for. Take responsibility Zambians.

      The elections are nigh, ‘let’s frighten the little people.’ That’s Zambian opposition for you!

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  8. This is muck raking. Fact, the biggest complaint throughout 70’s, 80’s until the 00’s was ‘Pot Holes’ and Zambians flocked to next door countries to shopping malls in Zimbabwe and South Africa.

    Now we have good roads(almost there), and our own malls where can buy Zambian and keep our money in Zambia. What are we complaining about? YEP…er the cost etc etc. of course we must suffer a little bit to pay back for the developments. Pleeeeeease tell me UPND and others would have been able to bring this rise of living standards without borrowing! Come on!

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    • Scratch your head a bit and note the opposition asking for costly referendums for constitutional changes! These criticism do not take into consideration the changes in world economies that have impacted the original loans taken out at a better economic climate.

      Though it is true we have been collectively shouting about Hon Chikwanda’s borrow, borrow and borrow theory. However Citizens shout loudly for discomfort and then louder still for paying back the cost of alleviating it. Primarily it’s the nasty changes in world economies that is the problem. What with China Stock Exchange shutting down yesterday!

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  9. He is just too dull to understand. What decision has he ever made & implemented. Maybe the #89 Kabulonga decision. The rest its flip flop. Like they say he is neither coming nor going. Visionless.

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    • Am not sure, but it is clear Hon Chikwanda has asked ZRA to squeeze Taxes out of those who can okay. With elections on way and poor economic balance sheet maybe PF will step on it.

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  10. Even if that was true, uPMD is not a viable alternative at all. For a party that started off well as professional and disciplined, a party of economic managers, they have spoilt themselves with too many lies. I do not know whether it is desperation for power, or too many new members of all hues and colour, or the tribal transition in 2005, today it is certainly a party of a changanya mix of social and economic misfits each with his own dreams of becoming minister, or getting that contract, or becoming the ambassador or high commissioner, or Managing director of that parastatal, or even Chairman of that party committee at intercity bus stop. The uPMD cadres you interact with are not able to hide their ambition at all, if you keep your eyes and ears open, as they have dropped their guard…

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  11. @ Patriot Abroad, how true! They don’t mind a costly referendum or costly provisions in the constitution. It seems to me that the huge debt would be there regardless of whether it is PF or it was uPMD in power. The difference is that PF borrows to build roads, schools and other infrastructure while uPMD would have borrowed to fund the constitution, the referendum, the provincial assemblies, a new cabinet outside parliament, all the things that HH mentioned in his radio interview (you can read the full list of HH’s constitutional wishes somewhere on LT today). uPMD would borrow to fund all the things that the country can ill afford at the present time. But as false “economic managers” they have not counted the cost. I challenge uPMD cadres to refute what I have said, if they do let…

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    • @ terrible, I am sorry, I am NOT UPND, so I cannot accept your challenge in their name!

      What I can say is that no sensible person that understands economics would be adverse to borrowing……… with the condition that funds borrowed are wisely used to generate revenue to pay back the money, plus interest!

      To do that what is absolutely required is a coherent strategy and a PLAN that takes into account contingencies, like drought and low copper prices, and can still work! Which in turn requires FINANCIAL DISCIPLINE!

      Has this PF Government demonstrated that it has done this? With Chikwanda “revising” his estimate of inflation from 7% to 21% !!!!!!!!!

      With Lungu chartering a plane for a joyride for his friends to New York for $300,000 ????

      Is that what they call PRUDENT…

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  12. uPMD would also borrow heavily to fund all the things that the country can ill afford at the present time. But as false “economic managers” and false prophets they have not counted the cost yet or they conveniently will not mention what is obvious. I challenge uPMD cadres to refute what I have said, and if they do, let them tell us whether they would have funded all HH’s wishes from his deep pockets.

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    • @Terrible: I’m not a UPND cadre but what most bloggers e.g Hogwash, are saying is that there is nothing wrong in borrowing for development of the country. What is wrong is the way you spend the borrowed money- accountability. Borrowed money should be invested to generate income to payback the loan. Some roads constructed are critical to the economy while others are just appeasements to the voters.

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  13. Terrible please what are you defending, that’s the result of being a carders you have lost your mind and reasoning. Be objective, the writer has outlined the problem and showed how the country’s debt has grown. The country will be paying back triple more than they borrowed which is going to be a burden for the country. I know Chikwanda thinks it’s easy money but it comes at a price, a price he seems not to understand. Please PF just create more jobs or give incentives for people to hire more people and you will have more people to collect from, ever since you came into power you brought employment freeze, you took it off to dupe us and haven’t hired much. You can’t sustain development with borrowed money, it’s simply impossible.

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  14. What else would we have expected from a PF government? They came in with empty stomachs. Now full, they have started vomiting.

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  15. PF are just a bunch of money spenders. The country has for the past 4 yrs been surviving on eurobonds trickling down to the masses after they have stolen by overinflating project prices. Where are the investores we were told will come after we pay for the most expensive roads in the world???.
    PF have messed up the country and enriched them selves enough, it is time to try the next team.

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    • Not necessarily, Zambia has large amounts of copper that are being exported and could be confiscated or heavily taxed, if the government wanted to.

      What I would like the PF to explain is where the $3 billion of the Eurobonds went. And I have no sympathy for the World Bank or IMF, who are a bunch of crooks to begin with.

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    • No, we are doing fine!

      The ones that are stuffed are our children that will have to pay back this money!

      PF has eaten very well and will be gone by the time our children are starving.

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  16. So Zambia has $9 worth of debt, 3 billion domestically. However it is the $6 billion of foreign debt, $3 billion of which are the Eurobonds, that this latest version of the PF party needs to explain.

    Where did the $3 billion go? And how are they going to pay it off, if they remain in government.

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    • What a question !!!

      Do you think this clueless Government with a drunkard president knows where TEN BILLION DOLLARS has gone?

      Or have even given a thought to how it will be repaid?

      That is really expecting pigs to fly!

      The only thing that they are thinking about is how to get re-elected so they can keep on helping themselves to public money!

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  17. Time and time again I becry the attitudes of most of our government officials, political and technocrats. They adopt an I dont care as long as I am okay attitude, which could bring untold and never seen economic problems on this country. Zimbabwe was more economically powerful, see were it is now!

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  18. My fellow Zambians, unfortunately we have to accept that Sata and his PF, and now Lungu too, has taken our beloved country down a dark road that ends in bankruptcy. Any person with an iota of brains can see this as clear as day.

    We cannot change the past, and pointing fingers of blame is also not helpful. What we have to do now is prepare for the future so that we can make the best of the very bad times that are without doubt coming our way.

    Zambia is technically bankrupt. We have borrowed far beyond our capacity to pay. What we need to do now is look at other countries that have also made this stupiid mistake and see how they have tackled the problem. From that we must develop a plan and a strategy that will pull us out of this hole we have dug for ourselves.

    Lets examine…

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  19. Lets examine Argentina, Greece and Zimbabwe and avoid the pitfalls they fell into. The solution to this mess can be found if we use our God given brains and our great natural resources.

    It is time to change we do things. God bless Zambia and all its people.

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