Zambia’s Minister of Finance, Situmbeko Musokotwane, says his country expects a debt health check to be completed by the end of this month, a restructuring agreement with creditors by April, and a formal agreement with the IMF to be signed in May.
“I have to be optimistic, because in the absence of optimism where can Zambia go?” Musokotwane said on Tuesday.
“We are a serious group determined to make sure that this issue of debt that’s been dogging us for years and years, we are determined to put this behind us.”
Zambia defaulted in 2020, becoming the first pandemic-era sovereign default, and today it is struggling under a debt load of over 120% of GDP. The IMF and the government reached an agreement on a $1.4 billion, three-year extended credit facility at the staff level in December.
Musokotwane outlined an ambitious schedule for the restructuring of Africa’s biggest copper producer’s debt, saying the IMF will complete its debt sustainability analysis by the end of February.
Musokotwane noted the country has to renegotiate its debt with a variety of formal and private sector creditors, but expressed hope of reaching an agreement in March or April, which would pave the way for an IMF loan agreement.
According to analysts, the timeline is ambitious given that the Paris Club creditors and China have not yet formed a creditor committee.
A major part of the debt restructuring will be played by China, which has heavily lent to African resource exporters in recent decades. More than $6 billion, or 40% of Zambia’s total publicly guaranteed and unguaranteed external debt, is owed to Chinese lenders.
Musokotwane said that the Chinese authorities have agreed to be a part of this process. They have agreed in principle, although details still need to be worked out.
He said, “In the end, I feel very confident that the Chinese authorities and the Chinese institutions that lent us money will play along to get us out of the problems.”
In December, Musokotwane announced that Zambia had agreed with the IMF to get rid of unsustainable subsidies in the energy and agriculture sectors.
Petroleum subsidies alone used to cost $800 million a year in the past, he said, adding that the petroleum sector no longer made sense.
A reduction in subsidies would mean shifting money to social spendings, such as education, which is also advocated by the IMF. However, no timeline has been set for phasing out support.
During the same period, Zambia’s copper production is expected to rise from 800,000 tonnes in 2021 to about 3 million tonnes over the next decade thanks to strong global copper prices.
Musokotwane says the government must first find an investor to take a minority stake in Mopani Copper Mines and fund an expansion.
ZCCM-IH, a state-owned mining investment company, bought Mopani from Glencore a year ago.
Additionally, the government is seeking to resolve a dispute over Konkola Copper Mines (KCM).
KCM was handed over to a provisional liquidator in May 2019 by Zambia’s previous government, sparking a legal dispute with India’s Vedanta Resources, KCM’s parent company.