ECONOMIST Trevor Simumba says Zambia should swiftly reach an agreement in principle with the International Monetary Fund (IMF) on an economic programme to allay investors’ fears and avoid an imminent debt default.

The Zambian government wants relief on its debt interest repayments from commercial creditors, which is estimated to provide as much as US $1 billion in relief, but has so far failed to get any positive feedback from Eurobond bondholders.

Last week, Zambia skipped a coupon instalment repayment on its US $3 billion Eurobond, accelerating the likelihood of a debt default.

In an interview, Simumba observed that the country would attract investor confidence, but only if an agreement with the Fund on a recovery plan was reached.

“Remember, Mrs Mwanakatwe, when she was finance minister, said something very profound. She said that, ‘debt is like a pregnancy, you can hide it for a while, but once it grows, there is no hiding it anymore.’ This is the situation Zambia is in now. The Zambian government for sometime has not been giving us the whole truth about the debt situation. They have been hiding the pregnancy of debt. And now it has been exposed, and can you imagine all those ‘lovers’, who thought they were number one in your life, suddenly realising that it’s not even their pregnancy! That there are many others and that’s what has happened with Zambia. Lenders are now realising that Zambia has several creditors,” he said.

“There is Chinese money, Russian money, Israeli money, Indian money and money from European creditors. So, the Eurobond holders considered themselves in what we call in economics, ‘the number one creditor.’ But they are no longer Zambia’s number one creditor and they have realised. Zambia’s number one creditor, according to government figures, is China. Now, the issue is that with China, much of that debt is not transparent. It’s not openly available. And so, we have ourselves in a situation where confidence and trust have gone. How do we fix it? We fix it by, number one, the government being fully transparent. Secondly, the government must move very quickly to agree and negotiate a deal with the IMF.”

He urged government to start renegotiating loans and demand for deferred interest payments, but only after agreeing a deal with the IMF.

“The IMF is very important because when they say, ‘we endorse this programme,’ and, ‘we are backing Zambia,’ it immediately brings confidence among the international creditors, including China. China as well is looking to see whether Zambia is able to get a programme from the IMF because even China does not want to lose money. China is not Father Christmas; they also want a return on their investment. It is in no one’s interest for the Zambian economy to ground to a halt. And then, thirdly, renegotiate the loan. It will be much easier to renegotiate at a cheaper price if we have an IMF-backed programme and we have some credit that have been put into the Treasury so that our foreign reserves can settle down,” said Simumba.

“And the fourth pillar is to look at our parastatals and identify some critical assets that we can immediately release into the private sector so that we receive and injection of foreign exchange. For example, KCM (Konkola Copper Mines), why don’t we find a buyer for KCM so that it can operate as a private sector company and government can get an injection of foreign exchange? They should stop this process of buying shares from Glencore. Let Glencore sell those shares on the international market.”

According to the World Bank Zambia’s external debt stock had sharply risen to US $27.3 billion by the end of 2019, but government, however, insisted the figure was the country’s total indebtedness.