Tuesday, June 18, 2024

G20 Finance Summit fails to resolve Zambia’s Debt relief Deal, What next?

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  • Geopolitical tensions overshadowed talks at the Group of 20 Finance Summit, with China at the centre of negotiations, but its finance minister skipped the meeting and addressed it virtually; as a result there was no restructuring deal for Zambia.
  • Russia – Ukraine War dominated the G20 meeting and diverted attention from Zambia’s debt restructuring deal with US Treasury Secretary Janet Yellen calling on members to redouble their efforts to support Ukraine and restrict Russia’s capacity to wage war.
  • Zambia had done an amazing job of reforming the economy and deserved progress in talks with creditors – IMF Chief Kristalina Georgieva at G20 Summit
  • Financial institutions and commercial creditors should follow the principle of joint action, fair burden in debt settlements. The World Bank and other multilateral development banks should also participate in debt relief by taking haircuts – China’s finance minister, Liu Kun in a video address to the G20 meeting

By Mwansa Chalwe Snr

The timing of the G20 finance Ministers and Central Bank governors’ summit in Bengaluru, India, could not have come at a worse time for Zambia. The date of the summit coincided with the one year anniversary of Russia’s invasion of Ukraine on 24 February, 2022.The Russia-Ukraine war’s first anniversary diverted attention from Zambia’s debt restructuring deal.

The United States and the International Monetary Fund (IMF) have been pushing China for the declaration of intent by signing a non-binding Memorandum of Understanding (MOU) for Zambia. This could then trigger the IMF board approval of Zambia’s bail out deal and release of the first tranche of funds for balance of payment support, thus stem the depreciation of the kwacha and restore investor confidence. Zambia has already fulfilled the IMF prior actions. But, it appears that the appeals to China have come to nothing, purely due to geopolitics and economics reasons.

Prior to her departure for the G20 summit to India, the US Secretary of Treasury Janet Yellen undertook to lobby for Zambia by focusing on unblocking the debt restructuring talks. She intended to press China to speed up its debt relief for Zambia. She was very hopeful and expectant that a deal could be struck on the Zambian debt at G20 meetings.

The hope and speculation that Chinese Finance Minister, Liu Kun would meet US Treasury Secretary Janet Yellen physically on the side-lines of the summit, were dashed when he joined the meeting virtually. He urged the G20 to hold a fair and objective analysis of the question of global debt and resolve it in a comprehensive and effective manner in a video address.

The G20 published the Chair’s (India) Summary and Outcome document. It made it very clear that the Summit had failed to resolve Zambia’s debt restructuring deal and hoped that it would be quickly concluded. The statement said: “We recognize the urgency to address debt vulnerabilities in low and middle-income countries. We welcome the conclusion of debt treatment for Chad and call for a swift conclusion of the work on debt treatment for Zambia and Ethiopia.”

The failure by the G20 Finance Summit to produce a restructuring deal for Zambia has proved beyond any reasonable doubt that the Paris Club, the G7, the US and IMF cannot deliver the restructuring deal for Zambia on their own. China is the key to the deal. There is no way of sugar coating this fact.

WHAT IS THE NEXT STEP AFTER THE G20 FLOP?

It is commendable that even before the failure of the G20 talks, the Zambian government had started to engage the Chinese authorities. On the 21st February, 2023, Xinhua News Agency (New China News Agency), which is the official state news agency of the People’s Republic of China, reported that Zambian Minister of Foreign Affairs and International Cooperation Stanley Kasongo Kakubo, had talked on the phone with the Chinese Foreign Minister Qin Gang on Monday 20th February, 2023. Foreign minister Gang, referred Stanley Kakubo to the 31st May, 2022 phone conversation between President Hakainde Hichilema and President Xi Jin Ping.

China is willing to work with Zambia to implement the important consensus reached by the two heads of state, enhance political mutual trust, deepen mutually beneficial cooperation, strengthen mutual support, and promote the stable and long-term development of bilateral relations”, Qin Gang said. “China and Zambia should strengthen coordination and cooperation on international and regional issues, jointly oppose unilateralism, protectionism and bullying practices, and safeguard the common interests of the two countries and other developing countries.”

The above Chinese foreign Minister’s statement is a loaded statement. The Zambian authorities should not read the statement superficially, but rather decipher it in order to correctly interpret it. The statement is couched in diplomatic language but has a special message for Zambia with regard to what sort of relationship China wants to have with the New Dawn government as agreed upon by the two Presidents.

Zambian authorities should be aware that phone calls and contacts at a low level will not unlock the debt deal. This is a high stakes geopolitical and economical game that is taking place. There is a need for a well thought out strategy that considers the various variables at play.

Zambia should engage China on the basis that it is a long time and all weather friend of China. The current stage that the debt restructuring talks have reached is such that any engagement with China should be based on lobbying and not negotiations. The time for negotiations is after the MOU. Further, the personnel that should be involved in executing the strategy should be the following: experienced diplomats led by the Ministry of foreign affairs, private sector communications strategists in conjunction with the Ministry of information, and not the Ministry of Finance and development planning technocrats.

The objective of the lobbying is simple. It is to persuade China to drop the two demands delaying the deal, in Zambia’s particular circumstances, and sign the non-binding Memorandum of Understanding.

Zambia should employ two pronged and parallel strategies. The first should be an aggressive communications strategy targeted at the Chinese English media such as Global times, Xinhua News Agency, China Global Television Network (CGTN) and South China Morning Post. The use of proxies for interviews, statements, articles should be part of the strategy. The messaging should, among other things, be aimed at removing the perception that Zambia has changed its non-aligned policy of the founding fathers. There is need for clarity, and reiteration that Zambia’s foreign policy has remained the same. As a small nation, the pursuit of strategic ambiguity or taking sides is not advisable.

The second strategy should be back channel diplomacy. This entails behind the scenes lobbying of China using experienced, respected current and former Zambian diplomats, who the Chinese authorities can trust. The diplomats should have sound knowledge of geopolitics and the Chinese culture. The objective of the diplomacy is to enhance what the Chinese call “Guanxi” between the two nations, which is currently perceived to be at risk. The diplomatic overtures could culminate in President Hakainde Hichilema visiting China in the nearest future.

As part of the back channel diplomacy, it would be smart for Zambia to utilize South Africa, because of its closeness to China and its strategic position in Zambia’s debt restructuring talks. The ruling African National Congress (ANC) and the Chinese Communist Party, enjoy excellent relationships. In addition, South Africa is a very good intermediary in the sense that it is a Southern Africa Development Community (SADC) member, Vice Chair of Zambia’s Official Creditor Committee (OCC) and a fellow member of BRICS with China, with immense experience in dealing with China. South Africa, could for example, lobby China among other things, to call for an urgent 4th OCC Meeting in March, 2023 to resolve Zambia’s debt. China will react more favourably to South Africa’s appeals on behalf of Zambia, than those coming from United States or United Kingdom or the International Monetary Fund.

As the current situation stands, the only publicly known date for the next official discussion on Zambian debt talks is next month. There are planned talks around the time of the IMF and World Bank spring meetings in April, 2023, possibly under the auspices of the new G20 established vehicle called – the Global Sovereign Debt Roundtable, which has brought public and private creditors to the negotiating table. Zambia can ill afford to wait for that. It should lobby China, the all-weather friend immediately.

Statecraft in the international arena requires a smart balance between politics, diplomacy and economics, and a need to draw on other people’s skills sets and experience, for risk mitigation. State governance and geopolitics are complex, with a lot of moving parts for even the smartest people to handle on their own, as Former US President Barack Obama observed in his memoir: “A promised Land”.

The writer is a Chartered Accountant, Author and an independent financial commentator and analyst. He is also an Op-Ed Contributor to the Hong Kong based, South China Morning Post (SCMP) and Author of: “China-West Battleground in Africa: Debt Ridden Zambia” (2021), which is available on Amazon.com (Contact: [email protected]).

15 COMMENTS

    • Why should they ?? Aren’t we african’s not the biggest, spounge’s known ?
      The richest mineral continent in the world, and still beggars
      Look within before judging

  1. China is facing debt distress in its bond markets and has little room to manouvre. The PF government repeatedly talked about a sinking fund to take care of debt repayment. Abuse of office accused Fredson Yamba was the one who told the whole world about it. Surprisingly chaps in the media are not asking him what happened to the sinking fund, that is, money which is set aside from current cashflows and periodically added to in order to repay a future debt or pay for an asset.

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    • Basically, it is the unbridled greed of our African leaders which cause us to end up in such awkward situations. If PF had managed the economy as well as MMD did, we wouldn’t have to go on our knees with hat in hand begging China for debt relief. It is humiliating to say the least.

      This talk of China being an all weather friend is rubbish. They are interested in our resources as much as the West and gladly burden us with debt that they well know we won’t be able to repay. Both would love us to remain weak so that we are easier to manipulate. Prov. 22:9 says “the rich rule over the poor and borrower is servant to the lender”. That is our situation thanks to PF and I am sure this is a piece of good news to them.

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    • The PF saw China’s indifference to their fiscal irresponsibility as a sign of true friendship. They still do even now.

  2. Next time you must be quoting a serious source on economic matters. An accountant cant be a source of analysis for economic policy and diplomacy.

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  3. I still remember Musokotwane bragging that he had clinched the IMF deal. Please tell us ba Minister…where is the deal? Mwalechimona kwanguka…..

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  4. Well, GRZ should show the Chinese , that…….

    They too have much to lose in an unstable zambia caused by debt distress……….

    China has hundreds of private and individual investors in zambia who don’t want a hostile environment………..

    the Zambian population can easily turn on them……

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  5. PF was/is incapable of doing anything good to Zambia including its founder late president Sata. PF borrowed huge debts from China without national consultation, parliamentary debates or justifications to these huge amounts of funds most of which ended into individual pockets. Indeed ACC should ask Fredson Yamba what happened to the Sinking Fund.

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  6. Doing the same things over and over and expecting a different result is borderline ins@nity. The one thing about Europeans is that they are very consistent in everything they do. I’m sorry to say but we told you so. Africa would have been a powerhouse if we severed our ties with these people. They use all sorts of trickery to bounce our unsuspecting politicians left right and centre.

  7. Zambia looking towards IMF for the much needed dollars. IMF can’t make a move until Zambia comes to a conclusion with China but China is not interested in talking to Zambia until it is pushed in the corner thereby going on its knees to China to agree to whatever terms China has to offer. Meantime Dollar has crossed the K20 mark on its way to adulthood……

  8. Ati PF mismanaged the economy so where has the confidence gone that you had to promise: Sworn in at 10hrs at 14hrs the Kwacha appreciates to K5.00 to a dollar. You didn’t talk About PF mismanagement being a stumbling block. You made everything look so simple especially when you claimed to be informed of daily happenings at Lungu’s State House.

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  9. Another brilliantly written article by Mwansa Chalwe Snr, well articulated sir and straight to the point with a level headed argument to back it up.

    Totally agree and I too have commented in the past that the key to resolving this debt relief crisis is to dialogue directly with China at a high level as implied by Mr Mwansa above.

  10. PF had basically mortgaged zambia, as a whole ……….

    To the Chinese………..

    ZESCO , airports , gamrparks…..all toll gates were to be run by China……….untill they got their money back.

    By the time that money was to be paid back , you would have had Chinese representatives of the largest Chinese population in parliament…………

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