Finance Minister Dr Bwalya Ng’andu has revealed that Zambia’s total indebtedness inclusive of contingent liabilities and debt owed by State-Owned Entities (SOEs) now stands at US $18.5billion with an average interest of 4.5 per cent.
Speaking during the investor call following the copper producers request to defer coupon payments on its dollar bonds for six months, Dr Ng’andu told bondholders that the country’s debt position to Gross Domestic Product (GDP) was 104 per cent, breaching the Washington based lenders threshold of 35 per cent.
“Zambia is spending half of government revenue collections to service interest on debt currently compared to a few years ago when only 20 per cent of revenues would be channeled towards interest obligations,” Dr Ng’andu said.
According to Dr Ng’andu, it had become increasingly difficult to service the country’s debt.
Of the US $18.5 billion, external debt owed by government directly now stood at US $11.97 billion, while the remainder reflects obligations by SOEs and is also in contingent liabilities.
Dr Ng’andu advised investors that the pandemic period had necessitated the ask to defer interest payment so as to create fiscal space as this will allow survival in crisis time while hedging the country against interest penalties for delayed payments.
Zambia has written to key creditors of which some such as the Paris Club have provided the copper producer with reprieve from 01 May to 31 December 2020.
The steps to engage creditors and rescope debt have been fuelled by COVID effects on the fiscal side for Zambia, which did trigger various stimulus interventions at both monetary and fiscal level.
Zambia, however, is committed and confident that it will implement measures adequate enough between now and the proposed stand still date so as to get economic bailout assistance from the International Monetary Fund (IMF).
“Debt stand still is required for us to work with the IMF. We are working within the Debt Service Suspension Initiative (DSSI) rules to qualify for the upper credit crunch programme by the lender as we are in breach of the IMF benchmarks. We are strongly committed towards implementing reforms that will address fragility. We will aggressively pursue a systematic creditor and debt management strategy,” said Dr. Ng’andu.
Zambia has rescoped some of its infrastructure projects to ensure that only those which were as critical as the 750MW Kafue Gorge Lower hydropower project for energy generation and those of social importance were prioritized.
A total of US $1.4 billion worth of potential disbursements were cancelled while the Ministry of Finance targets another US $1.8 billion next year.
Source: The Business Telegraph