By Yohane Mbeeya Moono
Zambian government under the Patriotic Front had a accrued unsurmountable amount of deal in order to improve the infrastructure of the country. However, the Eurobonds were not invested into income generating avenues and when it was concluded that the country needed Debt Relief, the Patriotic Front led government initiated the Debt Restructuring Programme. The programme demanded that the government should greater commitment to fiscal discipline.
In November of 2019, then President His Excellency Edgar Chagwa Lungu launched and Economic Recovery Plan which centred on Zambia securing an International Monetary Fund Bailout Package and restructuring Zambia’s insurmountable debt mountain that had left the economy is distress.
In August 2021, Zambia experienced a change of government and the New Dawn Administration under the United Party for National Development committed to ensuring that the Debt Restructuring Programme is attained. The Zambian government committed to being under an International Monetary Fund Bailout Package programme. This meant that the country’s commitment to improve fiscal discipline and social services would closely supervised by the International Monetary Fund. Though the initiatives are to be home grown by the government.
In June of 2022, the International Monetary Fund agreed on the Bailout Package because the Zambian government had attained the desired conditions for the Bailout Package. However, the critical issue remained at convincing the Zambian creditors to give Zambia some much needed debt relief in order for the country to commit substantial amounts into the resuscitating of the struggling economy.
It is worthy noting that Zambia because the first country in the pandemic era to default on debt payments. The country’s economy being in distress meant that the country could not afford to pay the debt. The Zambian government as of 2020 was spending about 56% of its revenue on debt repayment.
Why Debt Restructuring
The Zambian government is cognizant that she needs to pay her debt to the creditors but needs more time to transform her economic fortunes and be able to pay the debt. Therefore, the Zambian government committed to the Creditors to extend the payment period and reduced payment rates for the said debts.
The debt in question is mostly owed to commercial lenders who do not want to lose their investments but were open to having the debt paid over a longer period of time. Zambia had to give assurances to the lenders that their monies would be paid but not at a time when the economy was in distress. Hence the plea to have the debt payment suspended for three years and resume paying in 2026 when the country’s economy would have improved.
On June, 2023, the International Monetary Fund Chief Executive Officer announced that Zambia had reached the milestone agreement with the official creditors committee on the Debt Restructuring. The Creditors Committee was co-chaired by France and China with South Africa doubling the Vice Chair.
The Zambian President had been globe trotting to ensure that the Debt Restructuring Deal is clinched. The announcement of the deal being sealed and signed represents greater milestone for the aspirations of Zambia to transform her economic fortunes. Apart from globe trotting, the Zambian President has been engaging the different Presidents in order to have the deal reached.
What does It Mean for The Zambian Economy
The Zambian government had announced that once the deal of debt restructuring is clinched, this would allow the country to channel more money into the economy more especially income generating avenues in order to create more jobs for the Zambian population which sometimes cannot be patience. Additionally, more money would be channelled towards the improvement of the Education and Health sectors as well as the Agriculture sector.
The Zambian government through the Industrial Development Corporation needs to step up the establishment of industries like the Kalene Hills Fruit Company and the Katete Fruit Company as well as the Munushi Banana Plantation. The government now needs to attract more investments because the much needed investors should be restored with the deal being clinched. The country now needs all economically driven sectors to start functioning properly. The deal should act as the stimulus to spur the country to greater economic development.
Zambia needs to aggressively champion the transformation of the economy in order to be able to be ready to repayment the debt. Zambia has been given debt relief for 20 years and a grace period of 3 years meaning that in the next three years the country shall not worry about debt repayment but development and growth of the economy in order to be ready to pay the debt beginning 2026.
Time has come for the country to improve the economic fortunes