Zambia's debt crisis worsens

Zambia’s debt situation seems to be deepening with some commercial creditors “refusing” to grant it some relief it has been seeking to ease the pressure, the country’s Parliament heard late Thursday.

“Although we have obtained some relief under the debt service suspension initiative (DSSI) window, particularly from official creditors, engagements with commercial creditors, have not yet yielded the expected results. This is because these creditors were concerned that we were not treating all creditors equally,” Finance minister Bwalya Ng’andu told the House in a statement.

The government appeared to be discriminatory, according to the creditors, in the way it is servicing certain categories of debt while not others, he said.

Concern was raised that the Eurobond debt was not included in the request and that Zambia had continued to service all Eurobond payments when they fell due while allowing the accumulation of arrears on other portfolios.

Dr Ng’andu said the exclusion of Eurobond payments from the DSSI request also made some creditors reluctant to grant it 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.

He also said the stock of external debt as at the end of 2019 stood at $11.97 billion but added that with the guaranteed debt for state owned enterprises was $13.55 billion.

“I have noted, regrettably, that some sections of the domestic and international society, that may not have read the recently released 2021 international debt statistics report by the World Bank, are quoting government debt as being $27.34 billion as opposed to $11.48 billion at end of 2019,” he said.

The amount stated in the World Bank report refers to the total national debt that includes private sector external debt of $15.57 billion.

Zambia has been engaging its creditors to seek their approval for suspension of debt service payments for a period of six months in accordance with the terms of the G20 and Paris Club debt service suspension initiative.

Local media quoted Zambia President Edgar Lungu saying the country’s debt situation was giving him “sleepless nights”.

The opposition and civil society have made it a moot point ahead of the 2021 general election.

The incumbent regime borrowed heavily to spend on infrastructure and at times to pay civil servants.