In recent years, the debt profile in Zambia had been spiralling and in 2020, it became the first country to default in the pandemic era, after having opted out of the $42.5 billion Eurobond repayment. However, its debt crisis predates the pandemic and various creditors have debated who should take the loans that Zambia ultimately cannot repay.
That said, a solution appears to be on the horizon for Zambia as debt restructuring talks are set to begin soon in a bid to determine if repayments could be rescheduled and if there are any possibilities of debt relief. This restructuring is mainly dependent on China which hitherto had refused to participate in the dialogue, despite being the largest creditor of Zambia’s debt. Business Edge for the new week opens with Zambia’s debt talks. Chibamba Kanyama, economist and former communications officer at the IMF, joins Tolulope Adeleru-Balogun from Lusaka, Zambia.
Since when Zambia defaulted on its debt commitments, requesting for debt relief and finally getting the vested parties to sit at a table with it, much has been happening. This is according to Chibamba Kanyama who explains that Zambia has continued to default on its debt as it is yet to receive any cancellation but that the country has reached a staff-level agreement for the possible IMF programme. There is also renewed confidence in the country, with regards to investment as the inflation being experienced is on the downward trend.
“[The situation in Zambia has made it such that] whenever money comes in, whatever is collected in taxes, the expenditure is already determined. 45% of Zambia’s revenue goes towards debt servicing,” Chibamba Kanyama adds. In other words, the debt is simply not sustainable. This is why no matter how aggrieved the debtors feel, it is important that they are part of the conversation and why China’s inclusion is welcome.
Watch the full episode above.