Debt-Burdened Zambia Comes Under Fire over Debt Mismanagement Accusations, Gov’t Seeks Creditors’ Clemency

Zambia’s debt situation has continued to vex the minds of stakeholders with government labouring to explain matters day in and day out. With the world bank recently releasing the 2021 international debt statistics report, both local and international economic players have been debating and questioning what Zambia’s real debt profile is.

In his address to Parliament, October 15, the country’s Minister of Finance, Dr. Bwalya Ngandu regretted that Zambia’s debt was being misquoted to be standing at $27.34 billion USD when in fact, it should read $11.97 billion USD as of 2020.


Dr. Bwalya Ngandu, Zambian Finance Minister (C) Zambia Reports

“I would like to reaffirm that our stock of external debt as at end 2019 was as I reported in my 2021 budget address, which is USD11.48 billion. As at end June 2020, this figure increased to USD11.97 billion, which when we add the guaranteed debt for state-owned enterprises comes up to USD13.55 billion…” he clarified.

Dr Ngandu clarified that the amount stated in the World Bank report refers to the total national debt that includes private sector external debt of USD15.57 billion.

“Private sector external debt is foreign-denominated debt owed by all non-government entities in Zambia in all sectors including mining, manufacturing, transport, energy, wholesale and trade to mention some,” the Minister insisted in his press outing while reaffirming government’s commitment to equal treatment of all its creditors and transparency in its engagements. He also emphasized that engaging with the creditors is necessary and is in the best interest of the country.

Zambia is on record to have obtained some relief under the debt service suspension initiative (DSSI) window, particularly from official creditors. Despite multiple engagements with commercial creditors to seek debt suspension, the government’s efforts are yet to yield the expected results.

“Concern was raised that the Eurobond debt was not included in the DSSI request and that Zambia had continued to service all Eurobond payments when they fell due while allowing the accumulation of arrears on other portfolios. The exclusion of Eurobond payments from the DSSI request also made some creditors reluctant as they were concerned that the debt relief they would provide would be used to pay debt service to other creditors and not be channelled towards covid-19 related expenditures as intended,” Dr. Ngandu said, expressing optimism that the request for a 6-month standstill on loan interest payments as part of the debt strategy development process would ultimately allow the government room to service its debt burden with relative ease.

Government apologists and finance experts within Zambia also hold the view that a standstill will give immediate relief on the budget and most importantly allow the country time to finalize its debt sustainability analysis that will provide details of the broad asset-liability management measures. These measures, they argue, must be implemented to deliver debt sustainability over the medium term. The debt sustainability analysis will also provide details that are required to provide for informed engagement with the different creditors, including Eurobond holders, on the adjustment in order to attain debt sustainability over the medium to long term. The government has indicated that “This will be done with the full support of the IMF”.

In his address to Parliament, the Minister of Finance also noted that the debt payments to bondholders, including the payment which fell due on October 14, 2020, to April 14, 2021, have been included in our debt service deferment request.

The bondholders are to this effect expected to cast a vote on Zambia’s request for a debt standstill, after which meetings for the three series of bonds will be held to pass the resolutions that will be made,” Dr. Ngandu.

However, the Jesuit Centre for Theological Reflection (JCTR), has expressed concern to Timescape that it was concerned that the government chose to ignore the many indicators of a debt default that have characterised Zambia’s debt discourse since the issuance of Zambia’s first Eurobond in 2013.

JCTR Executive Director, Father Alex Muyebe says the admission to likely default is a reversal from the Finance Minister’s assurance last month during the presentation of the 2021 national budget when he said that government had budgeted for Eurobond coupon payments next year to avoid default in the event that holders rejected the country’s standstill request. 


Father Alex Muyebe, Executive Director of JCTR in Zambia (C) YouTube


Most recently, on 25th September 2020, FITCH Ratings downgraded Zambia’s credit rating to ‘C’ from ‘CC’ warning of a high risk of a missed debt payment. The government, however, gave the assurance that it will continue to make debt service payments on outstanding Eurobonds if an agreement is not reached. JCTR urges government to seriously reflect on the debt problems that Zambia faces and resolve to walk the talk in addressing Zambia’s debt crisis,” Father Muyebe points out.


He noted further, that under the Patriotic Front Administration, Zambia’s external debt ceiling increased by 700% from K20 billion in 2011 (as guided by Statutory Instrument (SI) 53 of 1998) to K160 billion in 2016.


This exponential increase was not backed by increased economic performance evidenced through growth in real Gross Domestic Product numbers. The raising of the external loan ceilings followed the issuance of Zambia’s three sovereign bonds,” Father Muyebe goes on.


JCTR further reiterates that the government must be committed to reining in on the debt contraction and must provide evidence that it has slowed down on debt contraction. 


In the 2021 resource envelope, 44.9% of the budget will be financed through borrowing compared to 32.2% proposed in 2020. JCTR implores government to ensure that debt sustainability is operationalized,” Father Muyebe warns.


Zambia’s economic outlook over the next few years with such a huge internal and external debt burden does not appear encouraging. It will require strict austerity measures and a sustained fight against misappropriation and waste to reverse the current unattractive trend.