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Thursday, October 22, 2020

The Truth About Zambia’s Debt

Columns The Truth About Zambia's Debt

Dr. Grieve Chelwa PhD

Zambian social media platforms, especially WhatsApp groups, were very active yesterday sharing and discussing the publication of the World Bank’s latest International Debt Statistics Handbook. I’ve lost count of the number of friends on WhatsApp who sent me the hyperlink to the download page of the book. Ordinarily, the publication of the Debt Statistics Handbook goes without notice in much of the world and especially in Zambia. So why all this interest this time around?

Well, in the last couple of weeks, “Zambia and its debt” has been a topical issue with prominent coverage in the Financial Times and Bloomberg among other international outlets. The latest round of interest comes on the heels of an official request from the Zambian government for a payment holiday on upcoming debt service obligations. So this week’s publication of the World Bank’s International Debt Statistics Handbook (hereafter IDSH) fell into this milieu of strong emotions around Zambia and its debt.
So why all the fuss? Well, all the commentary on WhatsApp, Twitter and Facebook on the the IDSH zeroed in one single statistic reported at the top of page 150: Zambia’s external debt at the end of 2019 was $27 billion dollars! This is certainly a huge number and would suggest that the country’s external debt was almost equal to the size of the country’s GDP. And for many of yesterday’s commentators, this number was evidence that the Zambian government was understating the true nature of its external debt. For example, Finance Minister Bwalya Ng’andu recently told parliament that external public debt was $11.97 billion dollars, a number that is about $15 billion lower than the World Bank’s number.

So what is going on here? The confusion stems from the conflation of Total External Public Debt with Total External Debt. The two aren’t the same thing even though they seem like they are.

Total External Public Debt (the first one) refers to all foreign denominated debts that are owed by the Zambian government. This includes external debt directly owed by the government and debt guaranteed by the government but contracted by government or quasi-government entities. For example, Total External Public Debt would include the (in)famous Eurobonds and/or any guarantees issued by the government in favour of, for example, the Zambia Electricity Supply Corporation (ZESCO).
Total External Debt, on the other hand, is the sum total of all the external debt owed by entities domiciled in Zambia. This includes debt owed by the Zambian government (as defined above) and that is owed by Zambia’s private sector. Total External Debt would include external debt owed by the government plus external debt owed to foreign creditors by, for example, the privately-run mining industry.

By definition, and given the above, Total External Public Debt can never exceed Total External Debt. The two can be equal which would imply that all external debt is government debt. In practice, Total External Public Debt tends to be lower than Total External Debt primarily because the private sector also borrows from foreign creditors.
So what does all this mean for the publication of the IDSH and the commentary that followed? Well, the first thing is that the World Bank and the Zambian government are saying the same thing. The fourth line item on page 150 of the IDSH says that Total External Public Debt at the end of 2019 was $11.1 billion [1]. Minister Ng’andu told Parliament on 25th September 2020 that “[total] external public debt stock increased to US$11.97 billion as at end-June 2020 from US$11.48 billion at the close of 2019…”. As one can see, these numbers are pretty much around the same ballpark.

The June 2020 number, as reported by the Minister, is slightly greater than the 2019 numbers (from the government itself and the World Bank) because of the likely accrual of additional external public debt in the first 6 months of 2020. The 2019 numbers by the World Bank and from the government are slightly different from each other because of likely accounting/reconciliation issues. Interestingly, government’s number for end 2019 is greater by about $300million. This might be the result of one public guarantee or the other that was not captured by World Bank statisticians.

So in many ways the World Bank’s IDSH is telling us nothing new beyond what the government has already told us regarding the country’s external public debt.
As to whether the $11 billion number (from both the World Bank and the government) is to be believed is a different question altogether. I have good reason to believe that the “true” external public debt is around this figure. Margaret Mwanakatwe, Ng’andu’s immediate predecessor at Finance, instituted a debt reconciliation drive about two years ago and committed the Ministry of Finance to issuing quarterly debt briefings (although the frequency of the briefings has reduced lately). This was in response to heavy domestic and foreign criticism that the Zambian government did not know the true extent of its debt obligations. It appears the Ministry of Finance has gotten on top of this issue and, for example, recent IMF statements on the country are no longer broaching the subject of debt reconciliation as they did a couple of years ago. Economist Trevor Simumba, however, believes the true extent of external public debt might be higher owing to the opacity around debt contraction from China. He might very well be right.

Before concluding, I want to briefly talk about one aspect that struck me from the IDSH that few talked about yesterday and that I had been unaware of. According to page 150 of the IDSH, Zambia’s private sector owes a whopping $14.7 billion to foreign creditors! In other words, private multinational corporations, private companies and private individuals all domiciled in Zambia collectively owe about 54% of Zambia’s Total External Debt (recall the definition of this from above). This implies that Zambia’s private sector is just as indebted to foreign creditors as the Zambian government is. In actual fact, the private sector owes much more.

As a country, we have not debated and thought about private sector debt as much as we should. It’s worth engaging with this issue because, for one thing, economic crises can result from the unsustainable buildup of external debt by the private sector (see the Asian Financial Crisis) just as much as they can from unsustainable buildup of public debt. Second, pressure on the domestic currency (the Kwacha) can also arise from the demand for foreign currency by the private sector to meet its external debt obligations just as it can from demand by the government. So in a nutshell, any talks about devising a strategy for Zambia’s external debt should include discussions about external debt held by the private sector.

[1] The IDSH refers to it as “Public and Publicly Guaranteed Debt”

The Author teaches economics at the Graduate School of Business at the University of Cape Town. From 2016 to 2017 he was a postdoctoral fellow at the Center for African Studies at Harvard University. He holds a PhD in Economics from the University of Cape Town. His twitter handle is @gchelwa.


  1. These are things worth discussing. From this article, one could actually conclude that probably our Kwacha has been underperforming because of the huge stock of Private Debt. And unfortunately, my gut feeling tells me the bulk of this private debt is from the Mining and Energy Sectors. Many thanks for this Dr Chelwa.

  2. Whatever the true figures ,you can’t dispute the fact that debts have increased 100% under PF’s misguided era of economic uncertainty.

  3. He sounds more reasonable, but where was he all along? I’m certain that CEC is one of the private debtors whose probability to default on its debt increased after Nkhuwa signed that useless S.I. It might also explain why Glencoe has given up on Mopani so easily. Those involved in the transaction for the ZCCM=IH takeover of Glencoe shares must be transparent. Don’t come and tell us in future that the mine is under-performing because you inherited a huge debt from Glencoe, you’ll go to prison!

  4. Very good article that has enlightened me to the meaning of total external debt. So it is actually Zambians with nkongole.

  5. Either way, Zambians have been shafted in the rear for generations to come by lungu and his gang….

    The roads they are showing off will have crumbled long before that debt is paid off. Atleast 50 years to a minimum.

    Short of discovering oil or a seismic change to GRZ and Zambians in general work ethics , we are done for.

    A main problem is everyone in Zambia , including all Mps want to be bussiness men. No one wants to work diligently for the nation and creat common wealth for the nation.

  6. Wait wait , you mean to tell me our brilliant bestest economist MR HH does not understand this. He just published on tweeter that Lungu has made gvt owe $27billiin. … Maybe he is it so brilliant afterall

  7. “In fact the private sector owes more than the government” and yet here you are crying like constipated pigs. Every nation at the moment is incurring debts due to poor global economic conditions due to covid. You do not need a PhD to figure that out. It’s common sense which sadly is lacking from the upnd diasporans.

  8. I like the simplicity and straightforwardness of the article. But can’t our Economists in our Universities and Colleges in Zambia write to explain in simple terms like what Dr Chelwa did. The grassroot is Zambia is mostly bombarded by misinformation most of the time. Let our lecturers and other learned friends do much more on such social issues to educate the public, otherwise we will start educating them.

  9. KZ

    “……Every nation at the moment is incurring debts due to poor global economic conditions due to covid. You do not need a PhD to figure that out…”

    Stop lieing …….Zambias economic decline started as soon as lungu assumed office……..

    And…….other nations are well geared to weather the covid malice economically due to sound economic and industrial foundations

    The UK owes £2000 billion but will come out of this debt in less than 20 years because they manufacture almost everything…..

  10. Bravery is one of the conditions of good scholarship. In the contribution, the author displays bravery by questioning half baked analysis. The statistics need to be complete and unbiased. It is clear that World Bank officials again did not use statistics in a balanced manner. The figures released by World Bank would have destroyed the remaining credibility that the country had always enjoyed. The country’s credentials are excellent. What is missing is how to focus on COVID-19 and other climate change related challenges. These are electric power imports, fuel imports, food imports, tourism deficits, incompetent, corrupt, fraud, etc. Excessive opposition propaganda is also responsible for fake news and doping the horse. The problem of debt will be solved by the genius of countrymen and…

  11. Thanks Dr.Chelwa, brilliant explanation! A clear demonstration of your scholarly credentials;Havard University one of the USA’s and World’s renowned varsities,then lecturer at one of Africa’s prestigious Universities.This explains how deeply we are in trouble as you have put it coz even if private sector owes more than GRZ, we have to be worried about lack of stewardship on part of GRZ to police some of pvt sector debt contractions to ensure it flowed into Zambia to be invested to contribute to growth of our economy.I will not be surprised if some of them borrowed against assets here but to invest elsewhere!!

  12. Alot of this amounts has ended up on building projects in Swazilnd and mushrooming mansions in and around Lusaka belonging to PF thieves .That why we are now seeing selective justice and political judgement .

  13. Yes some people here are blaming coronavirus pandemic for the current economic mess yet this PF government ravaged our economy long before covid broke out

  14. Where did you get your PHD? Private sector debt is between the lender and borrower. They sort it out themselves and usually the borrower has security and assets to back it up. It has nothing to do with us as a nation or the people of Zambia but the government debt is owed by us as a nation collectively including each and every zambian which was accrued on our behalf without our approval so it affects each and every one of us including those in the private sector.

  15. Very crisp explanation.. However, even if we remove the private sector debt, we are still in deep trouble. In fact, what we are struggling to pay is purely the 11 billion public sector debt, Yes indeed the debt has been well utilized by our government, and This article has clarified the World Bank figure, but has not given any change to our desperate situation in debt repayment.

  16. Kaizer, how much debt do you have personally? If you say a lot and then you say you invested the borrowed money in areas were you don’t expect to make money then your head need scrutiny like Lungu’s one. That brainwashed supporter of your Mwansa shetani will also require psychiatric examination


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