Zambia: Official Creditors Committee to be Formed, Expects Debt Relief

Zambia’s Finance Minister Situmbeko Musokotwane has announced the plans to set up a creditor committee to examine the sustainability of the country’s debt and the relief if any, that they’re willing to offer. Mr Musokotwane made this known on Friday, saying that Zambia was only weeks away from the approval of a billion-dollar extended credit facility.

The discussion of Zambia’s public debt, estimated at the end of 2021 to be valued at $31.74 billion, is expected to lead to creditors assuring the International Monetary Fund (IMF) for an extension of a $1.4 billion loan to the country.

At 120% of GDP, Zambia’s debt rose by 17% over a six month period last calendar year. In 2020, Zambia became the first country to default since the outbreak of the COVID19 pandemic. Although the country had agreed with the IMF in December 2021 for the three years extended credit facility, the set date of May 2022 for the signing of a formal agreement became unfeasible as the country’s creditors China and the Paris Club were yet to form a creditor committee.

However, Minister Musokotwane insists everything is going to plan and that the Debt Sustainability Analysis (DSA), which forms the basis of restructuring plans, had been completed. “We anticipate that the official creditor committee will be formed within the next few weeks, paving the way for the restructuring discussions,” he said in his address to Parliament.

Zambia’s debt rose 18% to $31.74 billion by the end of 2021 from end-June. Foreign currency debt accounts for 54% of Zambia’s borrowing, rising 2% in the second half of 2021 to $17.27 billion. Local currency debt meanwhile increased by 43% to $14.47 billion.

Zambia’s president Hakainde Hichilema had revealed at the start of his tenure in October 2021 that he had “met an empty treasury”, accusing his predecessor Edgar Lungu of misappropriation of public funds. “There’s a lot of damage, unfortunately. The hole is much bigger than we expected and the debt situation had not been fully disclosed by the former government,” he said at the time.

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