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Alba Iulia
Thursday, October 22, 2020

Government Debt is Not $27 billion as reported by World Bank, Finance Minister Tells Parliament

Headlines Government Debt is Not $27 billion as reported by World Bank, Finance...

The Minister of Finance Dr. Bwalya Ng’andu has told Parliament that the recently released 2021 international debt statistics report by the World Bank,  quoting Government debt as being US$27.34 billion is not correct.

In a Ministerial Statement on Zambia’s Public Debt Management Strategy, delivered to parliament Dr. Ng’andu reaffirmed that the Zambian Government’s stock of external debt as at end of 2019 was as he reported in my 2021 budget address, which is US$11.48 billion. 

Dr. Ng’andu said that the amount stated in the World Bank report refers to the total national debt that includes private sector external debt of US$15.57 billion.

Dr. Ng’andu further said that the private sector external debt is foreign-denominated debt owed by all non-Government entities in Zambia in all sectors including mining, manufacturing, transport, energy, wholesale, and trade to mention some.

 

The Minister also reiterated his remarks that , should Zambia fail to reach an agreement with its commercial creditors (including holders of its Eurobonds) on the terms of the appropriate standstill, as previously stated, the Zambia with its limited fiscal space will be unable to make payments and, therefore, fail to forestall accumulation of arrears.

The Finance Minister said that  Government has requested all its external creditors to agree to debt service suspension on similar terms. During the standstill period, the only foreign-denominated debt that Zambia will continue paying on a current basis is debt from multilateral agencies and debt for a few priority projects that have an immediate economic and social impact. These projects are in the health, edcuation, water and sanitation and transport sector

Below is the Full address

 

INTRODUCTION

Mr. Speaker allow me to start by thanking you for giving me an opportunity to apprise the honourable members of this house and the nation at large on the steps that Government continues to undertake in order to address the vulnerabilities emanating from our public debt situation and the measures taken in light of the negative impact of the COVID-19 pandemic.

Mr. Speaker, Zambia is currently in the process of implementing a liability management exercise aimed at restoring debt sustainability. As part of this process, the Government has been engaging its creditors to seek their approval for suspension of debt service payments for a period of six months in accordance with the terms of the G20 and Paris Club Debt Service Suspension Initiative (DSSI).

Sir, the DSSI initiative is a coordinated approach led by g20 and Paris club creditors which provides for the suspension of debt service payments for a period of 6 months for poor countries that request forbearance, with the aim of supporting these countries in overcoming the intertwined health and economic effects of the COVID-19 pandemic.

Mr. Speaker, the request for a 6 months standstill is part of our debt strategy development process. The standstill will give immediate relief on the budget and most importantly give the Government time to finalize its debt sustainability analysis that will provide details of the broad asset-liability management measures that are required to be implemented to deliver debt sustainability over the medium term. The debt sustainability analysis will provide the details that are required to provide for informed engagement with the different creditors, including eurobond holders, on the adjustment in order to attain debt sustainability over the medium to long term. This will be done with the full support of the IMF.

Mr. Speaker, although we have obtained some relief under the DSSI window, particularly from official creditors, engagements with commercial creditors, have not yet yielded the expected results. This is because these creditors were concerned that we were not treating all creditors equally.

We seemed to be discriminatory in the treatment of our creditors as are servicing certain categories of our debt while not servicing others. Specifically, concern was raised that the eurobond debt was not included in the DSSI request and that Zambia had continued to service all eurobond payments when they fell due, while allowing the accumulation of arrears on other portfolios. The exclusion of eurobond payments from the DSSI request also made some creditors reluctant to grant DSSI as they were concerned that the debt relief they would provide would be used to pay debt service to other creditors and not be channeled towards COVID-19 related expenditures as intended.

Sir, in order to make progress on these engagements and get the full benefits of addressing the impact of COVID-19 through the DSSI, it became necessary to request Eurobond holders for a six-month suspension of debt service so that all categories of creditors receive similar treatment.

ISSUANCE OF A CONSENT SOLICITATION MEMORANDUM

Mr. Speaker, the Government of the Republic of Zambia, working with its financial and legal advisors (Lazard and white & case respectively), initiated the bondholder engagement process through the issuance of a Consent Solicitation Memorandum (CSM) on 22nd September 2020.

A consent solicitation is a formal process for seeking approval from the bondholders to amend the terms of the bonds, either by way of written resolution or bondholder meeting. The consent solicitation memo requested that a standstill on coupon payments for a period of 6 months from 14th October 2020 to 14th April 2021 be granted.

OBJECTIVES OF THE CONSENT SOLICITATION MEMORANDUM

Sir, the objectives of the consent solicitation memorandum which we have requested the bondholders to consent to are:

  1. To suspend any interest payment due in respect of each series of notes for six months from 14th October 2020 to 14th april 2021 (the “standstill period”).
  2. To get an irrevocable and unconditional waiver of any breach on any obligation in respect of the bonds, that may arise in connection with, or as a result of, the deferral of interest in (1) above;
  3. To get an irrevocable and unconditional waiver of any breach or alleged breach of any obligation under or in respect of the bonds, which may have occurred prior to the standstill period such as a cross-default; and,
  4. To amend or modify the conditions, the deed of covenant and the agency agreement as are necessary to effect the deferral of interest and the amendments, waivers and authorisations set out in paragraphs (1), (2) and (3) above.

ENGAGEMENT WITH BONDHOLDERS

Mr. Speaker, following the issuance of the consent solicitation memorandum, I made a presentation to investors on 29th September 2020, highlighting the rationale for our request for a standstill. In the investor presentation, I highlighted the current macroeconomic and fiscal situation of our country including our current debt position and how it will be difficult to sustain external debt service going forward, if nothing is done to address the situation.

I, therefore, called upon the bondholders to support Government’s efforts by granting our request for a standstill for 6 months. The standstill will give us space to develop a long-term debt restructuring strategy.

I also emphasized the country’s strong desire to enter into a constructive, transparent and equitable dialogue with all our creditors as we undertake the debt restructuring process aimed at restoring debt sustainability. Since then, we have had engagements with the ad hoc bondholder committee through our advisors and we are currently responding to the questions that are being raised from the presentation.

NEXT STEPS REGARDING EXTERNAL DEBT SERVICE

Mr. Speaker, the debt payments to bondholders, including the payment which fell due on the 14th October 2020 to 14th April 2021 have been included in our debt service deferment request. The bondholders are to this effect expected to cast a vote on Zambia’s request for a debt standstill, after which meetings for the three series of bonds will be held to pass the resolutions that will be made.

As the ministry has stated before, should Zambia fail to reach an agreement with its commercial creditors (including holders of its Eurobonds) on the terms of the appropriate standstill, as previously stated, the Republic with its limited fiscal space will be unable to make payments and, therefore, fail to forestall accumulation of arrears.
Sir, the Government has requested all its external creditors to agree to debt service suspension on similar terms. During the standstill period, the only foreign-denominated debt that Zambia will continue paying on a current basis is debt from multilateral agencies and debt for a few priority projects that have immediate economic and social impact. These projects are in the health, education, water and sanitation and transport sectors.

DOMESTIC DEBT MANAGEMENT

Mr. Speaker, in the area of domestic debt, Government will focus on raising financing from Government securities as well as meeting the obligations falling due.

Sir, the strategy on domestic debt management as indicated in my 2021 budget address, will be to:

  1. Keep the pace in terms of payment of debt service on domestic debt maturities;
  2. Lengthen maturities as we issue new debt to achieve long-term maturity profiles;
  3. Reducing arrears particularly to local businesses to inject liquidity in the local economy; and,
  4. Engaging and broadening investor participation in the Government securities market.
    The assurance, therefore, to the current investors and would be investors on Government securities is that Government is committed to developing the donestic markets furhter as a foundation towards economic recovery.

CONCLUSION

Mr. Speaker, as I conclude, I would like to reaffirm that our stock of external debt as at end of 2019 was as I reported in my 2021 budget address, which is US$11.48 billion. As of the end of June 2020, this figure increased to US$11.97 billion, which when we add the guaranteed debt for state-owned enterprises comes to US$13.55 billion. I have noted, regrettably, that some sections of the domestic and international society, that may not have read the recently released 2021 international debt statistics report by the World Bank, are quoting Government debt as being US$27.34 billion, as opposed to US$11.48 billion at the end 2019.

The amount stated in the World Bank report refers to the total national debt that includes private sector external debt of US$15.57 billion. Private sector external debt is foreign-denominated debt owed by all non-Government entities in Zambia in all sectors including mining, manufacturing, transport, energy, wholesale, and trade to mention some.

Sir, I will end by reaffirming that we remain committed to equal treatment of all our creditors and transparency in our engagements. We also note that this engagement is necessary and is in the best interest of the country.

Mr. Speaker I thank you.

30 COMMENTS

  1. Me and Chris Mvunga have no idea what that sober Bwalya Ngandu is talking about.
    Zambia has Chris Mvunga as Bank of Zambia governor…. Kekekekeke. When Chris is drunk he can’t count even up to 10.

    10
    2
  2. No. With current policies you will be no better in April 2021 than you currently are; matter of fact we might be in free-fall by then. Let’s change tack and please radically overhaul our governance. As a consumer society our trajectory is definitely a plane that has stalled and is about to go into free fall.

    14
    1
  3. In other words – Yes, the World Bank is right. They know how to count and follow the money. They’ve been doing it a long time. No – there is no conspiracy to lay waste to the ‘great name’ of Zambia on the international stage. We have been stupid enough to vote criminals into power, and they are leaving us with a debt that will take decades to clear, even once they are thrown out in 2021. It makes me sick.

    26
    2
  4. The Minister is on cloud 9 and doesn’t know what he is arguing about. You can’t hide debts any more. The World Bank has been asking you to be transparent and honest and give the correct figures of your debts. However you have done to sea to try as much as possible to hide every single piece of information. So they went out and got the figures from the people you owe money and now you are crying fawl! Instead of crying fawl tell us how you are going to pay back..

    20
    2
  5. Bwalya Ngandu is saying that the private sector in Zambia have an external debt of US$15.57 billion which is 2.5 times the total national debt of Rwanda.
    Rwandas total debt in 2019 is only $6.2billion (page 120, 2021 debt statistics report)
    How is that possible?
    AIKONA MAN

    13
    1
  6. Thank you minister for availing us with nothing but the truth. There are evil forces out there championed by opposition which are trying to bring this country down. They think they will get a chance to rule when Zambia is on its knees

    2
    8
  7. I know KZ is yet to comment but I TOTALLY AND 100% AGREE WITH HIS COMMENT (HIS COMMENT TO COME)… GOD BLESS THE PF AND ZAMBIA!! We are on the right path. Once the benefits of infrastructure investments start strolling in by April next year, we shall start paying back. We shall clear this debt by December 2021 AND ALLOW HIS EXELLENCE FREE SPACE to complete the remaining national projects in his THIRD TERM.

    3
    11
    • hahaahhahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahhahahahhahahahahahahahhahahahahhahahahhahahahahahahhahahahahahahhahahahhahahaha

  8. This goes to show that UNIP government was better off in terms of debt accummulation,Education and infrastructure development.
    Unip after leaving govt left close to US$4 Billion dollars
    Educated alot of Zambians most of them are now in the current government
    Contructed alot of infrastructure roads,Schools, hospitals,Universities without corruptions by Ministers
    In days Unip govt Ministers were not owning companies or going around dishing money to Marketeers

    10
  9. World Bank is ruthless

    They told us to sell mines and now they are quiet because nothing good car out,

    Because they want one of theirs to be the next president they are on another crusade

    2
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  10. The honourable minister zambia debt is $27.0 billion full stop.Zambia is one country, theres no public and private zambia.One zambia one debt and that debt $27 billion Lesa apale.

    10
    1
  11. The world Bank statistics are more reliable than that of Finance Minister Bwalya Ng’andu. The reason is simple, the world Bank is a more credible institution that scans every country’s economic and financial position in the world. So, Zambia does not disclose totally its indebtedness to China when it comes to disclosure of such debt during multilateral discussions with cooperating partners. This paints an incorrect position about Zambia’s indebtedness to the world. Hence, Finance minister Bwalya Ng’andu’s statement does not hold any water. Go and argue it in Washington.

  12. I repeat, one Zambia One debt and that debt is 27 billion. Surely why should we classify the debts when they are all debts payable. Unless you are saying that the 15 billion debt won’t be paid.

  13. Can anyone tell us what country on this earth has no debt, it a shame that debts in Zambia can be so amplified that everyone is talking about it.
    America borrows more than any other country on this earth and generally it is the most developed nations that have massive I say massive debts than our small nations.
    Zambians must not stress people about debts as if it endangers their personal lives, what is happening in Zambia is just about politics by politicians.

    1
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  14. This minister towing the cadre line can never and will never face the reality the country is facing.

    World Bank has the full information of our debts and whom we owe.

    He is clueless on how the world bank operates. Just admit that we’re in deep trouble with these drunkards.

    PF must go!

  15. The $27 bn debt is the true state of affairs because the World Bank is an independent external source of evidence which is reliable. The private external debt of US$15.57 billion is part of the debt because government has given guarantees on the borrowings.

    Therefore, this government thought they would continue to borrow then steal the funds to finance their lavish lifestyles. Wrong doing does not continue indefinitely because at some stage something , surely, has to give.

  16. PF should share and pay back this debt! All debt that was accrued outside Parliament Approval Process should be taken to PF Secretariat! Let PF deal with this issue. The only debt Zambia had is what is recorded as approved in our Parliament Hansard record Period!

  17. So what? Are you able to pay that $11 billion even if it is? What is the point. We know total country debt is $27 billion but that still comes to the doorstep of government for not even giving oversight for private debt. The entire country will be repossessed. A mambala. So while government was busy borrowing, the private sector was also on nchekelako rampage. Keith M’levu must be turning in his grave.

  18. World bank cannot segregate the two debts or categorize the separate. Which private companies got external debt and was that not monitored by the bank of Zambia?. So the FDI (foreign direct investment) into Zambia has now become private debt ka. Can govt publish the private debt so we can see

  19. It’s now not even about what the actual debt is. That’s an unnecessary diversion. We know it’s unsustainable – so the question is; how are we going to deal with it? Some bloggers here are saying it’s fine because developed countries borrow all the time. It’s not. Your currency is linked to those developed countries currencies – which is the first weakness. Secondly, the developed countries can afford to borrow because they produce enough and can sustain the debt over a long period. YOUR kwacha value linkage to major currencies and the fact you don’t manufacture or sell enough, means further borrowing or creation of money (through printing or digital quantitative easing) will only result in hyperinflation and deeper poverty.

  20. The solution is a new government that can gain trust through the exhibition of a prudent fiscal plan. This would attain agreement to restructure some of the debt, cancel part of it and attract further investment in real economic activities. No one trusts the PF government from anywhere in the world and they have reason not to. In short, with this government, we are doomed.

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