Zambia’s Quest for Debt Relief and restructuring Must be Transparent

By Nalucha Nganga Ziba Country Director, ActionAid Zambia

With the advent of COVID-19 early this year, seeking debt relief was almost inevitable for Zambia as the country’s economy was already in malaise and public debt was not only unsustainable but also unredeemable. As of 2018 Zambia had breached all critical debt sustainability indicators while IMF had earmarked that Zambia is among the countries likely to default on its public debt obligations. Debt service suspension has been seen as a powerful, fast-acting measure that can bring real benefits to people in poor countries, particularly countries that do not have the financial resources to respond to the coronavirus (COVID-19) pandemic. COVID-19 can only be considered as a blessing in disguise for Zambia.

For now, seeking for debt relief and debt restructuring seems to be the only way forward for Zambia. However, ActionAid Zambia is concerned that there is little to no transparency and accountability, not only in the debt reduction process but also in public debt management. For example, on 27 October 2020 the Ministry of Finance, via the Secretary of the Treasury, released a statement announcing the deferral of Zambia’s debt service by the Development Bank of China for six ( 6 ) months without explicitly specifying the amount involved and the conditions for deferral in terms of principal and interest payments.

We would like to encourage the government to adopt a spirit of transparency as it is one of the main principles of good and democratic governance in the management of public finances and, in particular, the process of debt restructuring.

Public debt restructuring may extend the loan period but may also increase the interest rates thereby increasing the costs and pushing the problem into the future. It is therefore, important for government to be as transparent as possible in all this debt restructuring process; that’s is the government must be able to disclose the creditor and the amount of debt involved both in principal and interest payments as well as the conditions of restructuring, especially with regard to the Chinese debts which have raised concerns from other creditors.

We would like to remind the government that the public debt related information is and must not be a preserve of the government and respective creditors but for all relevant stakeholders, including the citizens in whose name money is borrowed and the public debt restructuring negotiations are done.

Finally we wish to remind the government that the suspension of public debt repayment will only have a positive and significant impact on the economy and generally the lives of Zambian people if the debt repayment relief proceeds are used to finance critical public service provision as well as invested in key economic sectors which expediate Zambia’s economic recovery.