Finance Minister Margarete Mwanakatwe last week explained to parliament how the three Eurobonds issued in 2012, 2014, and 2015 were utilized and how much interest is being paid on each per year.

Responding to a question from Kabompo UPND member of parliament Ambrose Lufuma, Mwanakatwe said government was compelled to withhold the US$1.25 billion in dollars in order to reduce exchange losses when making payments in foreign denominated currencies.

“Eurobond one, US750 million dollars. Mr speaker, as the members may recall, the first Eurobond amounting to 750 million was issued in 2012 to finance various infrastructure projects such as those in the road, energy and health sectors amongst others in order to accelerate development and improve the livelihoods of the Zambian people. During the period 2012 and 2013, government released 310 million to the road sector, 255 million to the energy sector whilst the railways sector received 120 million. Other releases were 29.4 million to the health sector and 20 million to recapitalize the Development Bank of Zambia,” Mwanakatwe explained.

“Eurobond number two, was US1 billion dollars. Mr Speaker, the second Eurobond amounting to one billion was issued in 2014 to mainly complete some of the outstanding projects so as to unlock further economic capital. Mr Speaker the bulk of these resources was channeled to infrastructure projects which accounted for K2.8 billion during the period 2014 and 2016. Notable expenditures under this category included K1.8 billion for road, K634 million for establishment of new districts and K123.8 million for the railway system. Mr Speaker sir, other sectors that benefited from bond included the energy sector at K955.7 million, education sector at K496.6 million, and the recapitalization of state owned enterprises at the cost of K480. 4 million. The remainder was shared amongst the sectors of health, agriculture, water and sanitation sector whilst part of it was used for general budget support as appropriated by parliament.”

She said due to volatility in Zambia’s domestic currency in 2015, government saw it prudent to hold part of the money from the third Eurobond in dollars in order to reduce exchange losses when making payments in foreign denominated currencies.

“Eurobond number three was US 1.25 billion Mr Speaker. The government in 2015 issued the third sovereign bond amounting to US$1.25 billion. Sir, it is important to mention that due to volatility in our domestic currency during that period, it was prudent to hold part of the money in dollars to reduce exchange losses when making payments in foreign denominated currencies. Mr Speaker nonetheless, releases were made to various sectors in an effort to foster economic growth and also ensure that liquidity was unlocked in the economy. Sir, the notable expenditures from this third bond were K2.6 billion to the agriculture sector, K3.3 billion to the energy sector, K2.2 billion to the road sector, K434 million to the health sector and K339 million to the education sector. The balance went to water and sanitation, construction of housing units for security wings, recapitalization of TAZARA, installation of navigation raiders, procurement of dredging equipment and general budget support as appropriated by parliament,” she said.

Meanwhile Mwanakatwe also gave a breakdown of how much interest is paid on each euro bond per year.

“In part two, how much interest is paid on each euro bond per year. Eurobond one, the principle amount US750 million dollars, the interest amount is US$40, 312, 500 million dollars. Eurobond two US1 billion dollars, the interest is 85 million per annum. Euro bond three 1.25 billion, the interest payment annually US$112,124,000 dollars. Government does not intend to default on the euro bond repayment. When the first, second, and third euro bonds for due in 2022, 2024, and 2025 to 2027 respectively. In order to deal with the refinancing risk posed by the maturing of the Eurobond between 2022 and 2027, government is proactively considering mechanisms aimed at redeeming the euro bond including implementing of a sinking fund,” Mwanakatwe said.

She also said the PF government had no apology to make to the Zambian people regarding debt contraction because it was meant to benefit the same people.

“This government makes no apology for the monies that it borrowed. It borrowed in 2012, the repayment starts in 2022. Zambia had been moved from a middle income country. The concession window was closing, we had to go international. We are making good use of this money. We heard the sectors articulated where this money has been spent. So Mr Speaker, I have no apology to make to the Zambian people because the Zambian people are going to benefit from us the PF government having borrowed this extent of Eurobond,” said Mwanakatwe.