GOVERNMENT is due to pay a total of over US $854 million in external debt service repayments to various Chinese entities in 2020 and 2021 as part of its ongoing debt servicing commitments, according to the Ministry of Finance.

And the Ministry has reiterated that debt suspension requests to Zambia’s various creditors, including Eurobond holders, was meant to give the country much-needed “breathing space” given the immense fiscal pressure government is under.

Meanwhile, the Ministry says it expects that a total amount of US $867 million will be disbursed by the end of this year towards priority projects, down from over US $1.7 billion as earlier anticipated, owing to the cancellation, rescoping and reprofiling of external public debt disbursements.

In a comprehensive written Question and Answer statement with investors released by the Ministry, following Zambia’s presentation to investors on September 29, the Ministry disclosed that its total external debt service repayments to Chinese creditors for this year and next, stood at over US $854 million in just a two-year period.

Details according to the Ministry’s response to investors’ question on the Zambian government’s engagement with Chinese creditors revealed that the breakdown was US $426.3 million owed this year, while US $428 million was due to be repaid next year.

But government, however, hastened to add that it was hopeful of succeeding with a debt restructuring programme with Chinese lenders, who include the Export Import Bank of China, among others, which would marginally reduce this year’s repayments to US $225.3 million.

“Central Government external debt service on Chinese loans amounts to approx. US $426.3m in 2020 and US $428m in 2021. Assuming the debt service suspension requests made by the Zambian government are all successful, the maximum amount of 2020 debt service suspended and rescheduled would be US $225.3m (debt service on Chinese entities from May to December). In addition, there are ongoing discussions to include arrears that have accrued up to end-April 2020 (approx. US $201m) to be included in the DSSI (Debt Service Suspension Initiative),” the Ministry stated in a brief seen on the London Stock Exchange (LSE) website.

“The Government of the Republic of Zambia has proactively engaged with Chinese creditors in the past few months, in the context of the DSSI, to try and secure the suspension of debt service falling due from May 1st, 2020 to December 31st, including arrears accumulated up to May 1st, 2020. Beyond discussions on debt service suspension, the government have informed Chinese creditors that they would be asked to participate to whatever subsequent debt treatment might be necessary to restore long-term public debt sustainability. Main Chinese creditors include the Export Import Bank of China, China Development Bank, the Industrial and Commercial Bank of China and a few other commercial entities, including the Bank of China. Ongoing negotiations have been focused mainly on agreeing debt service deferment in the context of the DSSI.”

The Ministry explained that the debt suspension appeals to creditors, including the Eurbond holders, who have, however, since rejected government’s moratorium on interest repayments earlier this month, was to create fiscal space.

“In order to alleviate the short-term liquidity pressure that we are facing, we have decided to pursue an immediate debt service suspension strategy leveraging on the G20 DSSI and are requesting all our commercial creditors to participate voluntarily on similar terms. While all such requests were made at a similar time and on similar terms to all our non-Chinese/non-Eurobond creditors, progress on these discussions varies among them,” it stated.

“The Zambian government is requesting a debt standstill from all creditors including the Eurobond holders in order to provide Zambia with some breathing space. The standstill period will be used to finalise the macroeconomic framework with the IMF, and design, with the assistance of the IMF and the participation of all our creditors, an appropriate debt management strategy.”

Meanwhile, the Ministry expects that a total amount of US $867 million will be disbursed by the end of this year towards priority projects, down from over US $1.7 billion as earlier anticipated, owing to the cancellation, rescoping and reprofiling of external public debt disbursements.

“Due to the cancellation, rescoping and reprofiling of government’s direct external public debt, disbursements have reduced as follows: as of the end of July, 2020, the total amount expected to be disbursed in 2020 for priority projects amounted to US $867.1 million compared with approx. US $1.716 billion earlier contemplated,” stated the Ministry.

“In 2021, expected debt disbursements amount to US $680.4 million (vs US $1.793 billion initially contemplated), of which 49 per cent will be on commercial terms, and 51 per cent on concessional terms. In 2022, expected debt disbursements amount to US $675.4 million (vs US $1.189 billion initially contemplated), of which 49 per cent will be on commercial terms, and 51 per cent on concessional terms. In 2023, expected debt disbursements amount to US $645.5 million (vs US $966.5 million initially contemplated), of which 43 per cent will be on commercial terms, and 57 per cent on concessional terms.”