Friday, March 29, 2024

Zambia’s Sovereign Debt Situation: Will The Country Default Or Not?

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By Father Alex Muyebe, S.J JCTR Executive Director

The Zambia External Bondholders Committee meeting is scheduled for today Friday, 13th November 2020 to decide on the fate of Zambia’s proposal for debt repayment holiday on the $3 billion of outstanding dollar bonds. In October 2020, Zambia missed paying its coupon of $42.5 million on its $1 billion bonds due in 2024 and was given a 30-day grace period. Coincidentally the date of committee’s decision and the date of the end of the grace period for coupon payment fall on Friday 13th November.

The Jesuit Centre for Theological Reflection (JCTR) hopes for a positive outcome. However, the question is: What if Zambia defaults on its sovereign debt? It is worth pointing out that Zambia has an obligation to repay its debt, irrespective of whether the proposal for debt repayment holiday is granted or not. The Minister of Finance, Hon Dr. Bwalya Ng’andu has assured the nation of Zambia’s commitment to not default on its sovereign debt.

If the committee rejects Zambian government’s proposal to defer the payment, it entails the coupon is due for payment on 13th November, 2020. With the already strained fiscal space, government must pay the $42.5 million and if not, Zambia would have defaulted.

A default on Zambia’s sovereign debt entails that the country is blacklisted and this bears implications on political, economic and social development. Additionally, there will be increased interest repayments as penalties, disrepute on Zambia’s credit-worthiness, and reduction in credit ratings. To finance local activities, the government may need to pull resources from various funds which would further weaken the fiscal space. This may lead to non-availability of funding for local development projects and wage freeze for the civil servants.

Therefore, JCTR encourages the government to seriously dialogue with the bondholders or find a lasting solution to debt restructuring. Primarily, JCTR’s concern is with the effects of debt burden and debt default on the ordinary citizens, especially the poor, the marginalized and the vulnerable.

8 COMMENTS

  1. They said Zambia would default almost year ago. Upto now we are still waiting for the default these upnd mother fakaz are wishing for. What sort of animal is this same default which I have never seen. My friend fuseke!!!!!

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  2. You have always been blaming UPND, yet you were warned several times to halt on borrowing. The answer from ECL was like “we can’t stop borrowing, we are in hurry to develop this nation” really. Then why is the govt failing pay 4% interest. This is so shameful.

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  3. It is funny that we copied the British parliamentary system but as usual, when we copy we go farther. Members of parliament are honourable only in the house of parliament and as they carry out their duty as MP. Honourable is not a title like Dr, Rev, Professor etc. So, when you refer to an MP outside parliament, he is just either Mr or Dr or whatever, but not Hon. You never hear anyone call the British Prime Minister Rt Hon Boris Johnson outside parliament and official parliamentarian communication. If you copy, do not go beyond the original.

  4. It is in the interest of the lender to negotiate repayment terms. This is a simple financial principle. The lender can only play hardball if they have an eye on an asset that the borrower possesses. If Zambia had nothing, no one would lend it money. They know what Zambia has and they are going to get it, no matter what.

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  5. Lungu and his minions knew the interest rates were too high but they went ahead contracted the loan knowing the millions will be in their pockets.

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