9.5 C
Alba Iulia
Tuesday, September 22, 2020

Africa Confidential reports that Construction of Kafue Gorge Lower hydropower station in limbo as China halts funding

Economy Africa Confidential reports that Construction of Kafue Gorge Lower hydropower station in...

The Construction of the $2bn Kafue Gorge Lower hydropower station, which was expected to start generating power this year, is stalled after Zesco failed to secure further financing.

According to Africa Confidential in its latest edition, Zesco had created a special purpose vehicle through which to borrow for the project, with more than $1.2bn already disbursed but that

Chinese insurer Sinosure has refused to underwrite a further loan, leaving the project in limbo.

The contractor, Sino Hydro, is also Chinese.

Sources dealing closely with the Chinese companies say that Zambia’s financial predicament is causing tension between them and their insurers and lenders.

Such is the quantity of Chinese debt that financial analysts say it should be the priority for restructuring, but apart from vague talk within the ministry, no progress has been made in this direction.

Finance Minister Bwalya Ng’andu wrote to several lenders in November to cancel the disbursement of funds in an effort to honour a pledge to stop the debt ballooning further, Africa Confidential has been told.

But the high-interest rates secured by the lenders because of Zambia’s poor credit rating means their appetite for lending continues.

After complaints to State House from lenders, Dr. Ng’andu has been forced to allow the disbursements to go ahead.

Political pressure on the bank for disbursements to continue regardless of the bank’s advice is a historical problem that is likely to persist.

While disbursements on new projects continue, others, such as Chinese-built roads and airports, have stalled because of delayed payments to contractors and shortages of financing.

However, Eurobond holders expect this to be done before Zambia attempts to restructure its $3bn debt to them.

The ruling Patriotic Front’s continued state of denial about the country’s dire debt situation sees the year begin with loan defaults, dwindling state revenues, disintegrating public services and unpaid civil service salaries.

The government’s failure to make a €6 million loan repayment on its military transport aircraft – one of a raft of delayed loan payments, including to Chinese lenders – signals immense pressure on the state coffers. Debt is expected to worsen this year and approach 100% of GDP.

The government has withheld all other payments, including public salaries, rather than miss a debt repayment.

But the government now has to foot the bill for millions of dollars of unplanned payments after becoming embroiled in expensive litigation and trying to alleviate politically dangerous power shortages.

The ostensibly stable state of the country’s foreign reserves, though extremely low, paint a misleading picture.

They remained at between US$1.3 and $1.4 billion last year, despite another year of heavy debt service payments.

The International Monetary Fund expects growth to have slowed to just 2% in 2019 and for the slump to continue owing to ‘absent policy adjustments.’

The current economic outlook leaves little hope that Zambia will be able to pay the $750m due in September 2022 for its first of three Eurobonds, so a restructure is imperative although it could come at heavy cost.

An IMF programme remains unlikely given the government’s determination to continue borrowing.

26 COMMENTS

  1. @Spaka, Not only HH conspired with Africa – Confidential but UPND borrowed heavily to create a huge debt for PF government – they will hallucinate

    • In away it is true. Ask council workers last time they got their salaries. Old pensioners remittance of public workers deductions to leaders and ZNBS. The list is endless. This has never happened before and surely we are headed for dangerous time.

  2. Lubinda Habazoka says all is well and will end well. Delays in raising the public sector payroll every month is a sign of a buzy government which sometimes forgets that it has such an obligation.

  3. The debt has grown from $2.5billion under the MMD to $19billion under the PF.
    Debt repayments account for 40% of the Government expenditure(50% goes to salaries/emoluments).
    ECL and the PF now still want to borrow more for the 2021 election campaigns. The future looks bleak.

  4. Problem is that there is a scarcity of professionals in the PF boma, the few that are there are either bootlicking yes men or PF cadres. For example there is no economist in PF except the sole candidate, the president.

  5. The last time I read about Africa Confidential a.k.a Cambridge Analytica, Zambia would have folded along time ago.
    Africa Confidential are rumor mongers. A disinformation unit aimed at disparaging Zambia’s beautiful economic outlook.
    Mundende promised june this year and june this year KLHPS is coming on board.
    Take KLHPS as Kafue Lower Hydro Power Station.
    Cheap propagandist misinformers.
    Callous scare tactic mongers.

  6. Anything to show the PF is failing is good for the doomsayers. It’s getting really boring. Issues like these arise in many projects globally but are sorted amicably. When hospitals are opened in the middle of nowhere or projects like Kazungula bridge are almost done, AC are mute. When a query arises in a project, they raise hell-utterly lazy journalism!!

  7. *****ic Zambians they quote any foreigner who spews negativity about Zambia.! What have you done for your communities as Zambians?

  8. AC is envious upon finding that Zambia has a very brilliant strategy of solving the current energy crisis. Ignore them. They are just disappointed that Zambia still has the potential to come out this energy crisis. Moreover, it is raining and the current energy crisis will come to an end and our economy will pick up substantially. Let us work together as Zambians. Do not take news from AC seriously.

  9. That’s why the new airport which was supposed to have been opened in october 2019 has delayed. I now see sense in this.

  10. ‘Ostriches’ are still burying their heads in the sand – until they get bitten in the b.utt and realise how serious the situation has been.
    Please also don’t speak for the many that are going through hard times – just because YOU are able to lick ECL’s crumbs from his
    banquet table.

  11. The best way PF can rebut this article is to give us the true picture. Is the project still funded if so how much has been disbursed. Figures do not lie

  12. Don’t believe everything you read from questionable sites especially African confidential. The only source of official information on the countries engagements and projects is the government itself. Hogwash. Kz

  13. You dont believe what Africa Confidential is reporting about Kafue gorge power lower? You believe what Zesco told us about no more load shadding by June because the power station will commission?
    Well both sides no need to argue, June is only five monthes away. Let’s see if load shedding will go away, and we will tell who is the liar, Zesco Mudende or Africa Confidential.

  14. It is what you get when you Invest money in Private Presidential Jets as well as Fire Fighting Trucks. There you go

Comments are closed.

- Advertisement -
Loading...
- Advertisement -

Latest News

Zesco United End Lwandamina Affair

George Lwandamina and Zesco United have parted company. The relationship was ended on September 22 by mutual consent. “ZESCO United Football...

Broke: Zambia pushes to defer Eurobond interest payments for six months

Zambia has launched a vote with its Eurobond holders, proposing to defer interest payments on its three outstanding dollar-denominated bonds until April 14, 2021. Zambia...

Load shedding to Disappear-Minister of Energy

The government has assured that load shedding will be a thing of the past once the construction of all the power plants is completed. ...

ECZ Starts off with 16 000 Pre-Online Registrations

The Electoral Commission of Zambia (ECZ) says the pre-online registration has been successful so far receiving about 16, 000 applications after launching the process...

Sensitise Patrons Against Irresponsible Drinking, Bar Owners Told

The Ndola City Council and Zambian Breweries have signed a Memorandum of Understanding (MOU) to curb irresponsible alcohol consumption among Ndola citizens. Ndola Mayor,...

More Articles In This Category