Finance Minister Bwalya Ng’andu has revealed that Zambia’s total indebtedness now stands at $18.5billion.
This is inclusive of continent liabilities and debt owed by State Owned Entities with an average interest of 4.5%.
Speaking during the investor call following Zambia’s request to defer coupon payments on its dollar bonds for 6 months, Dr Ng’andu told bondholders that Zambia’s debt position to gross domestic product was 104%, breaching the IMF and World Bank threshold of 35%.
“Zambia is spending half of government revenue collections to service interest on debt currently compared to a few years ago when only 20% of revenues would be channeled towards interest obligations,” Dr. Nga’ndu said.
“It is become increasingly difficult to service debt. Of the $18.5bn, external debt owed by government directly is $11.97bn while the remainder reflects obligations by SOEs and is also in contingent liabilities, he said.
Dr Nga’ndu advised investors that the pandemic period has necessitated the ask to defer interest payment so as to create fiscal space as this will allow survival in crisis time while hedging the country against interest penalties for delayed payments.
“Debt stand still is required for us to work with the IMF. We are working within the Debt Service Suspension Initiative – DSSI rules to qualify for the upper credit crunch program by the lender,” Dr. Ng’andu said.
“As is we are in breach of the IMF benchmarks. We are strongly committed towards implementing reforms that will address fragility. We will aggressively pursue systematic creditor and debt management strategy.”