A posting appeared on President HH’s Facebook page:

“History has been made! We are pleased to announce the agreement with our Eurobond holders. This is to restructure more than US$3.5 billion debt under the G20 Common Framework. Thank you Fellow Citizens for your patience as we look forward to a bright future for Zambia and its people.”

At first I did not see this posting because I was in a meeting and had not turned on my mobile data.

“CONGRATULATIONS”, a man who recognized me at ZESCO Front desk said to me. I was like “For what”? I looked at him with bewilderment, thinking it was a question of mistaken identity.

“Congratulations Honourable, you’ve done it, I mean DEBT RESTRUCTUING, it is done” and he showed me the President’s posting which I read on his mobile phone.

I was like “Wow, Mr President, you have done it”. I rushed home so that I could watch the NEWS on ZNBC TV for more details.

The question is “but why celebrate”?

I have been reading a posting by some DOOMSAYERS who wondered why we should celebrate when we are now going to start debt payment which were suspended during the restructuring negotiations. Why celebrate the debt repayments when prior to this breakthrough we were not paying.

On the face of it, it seemed to make sense and could mislead a lot of Zambians who do not understand the benefits or advantages of this DEAL to Zambia and its nationals.

Part of this restructuring deal reads: “DEBT REPAYMENT EXTENDED FOR ANOTHER 20 YEARS WITH 3 YEARS GRACE PERIOD IN ORDER TO STABILIZE THE ECONOMY”

The President (HH), one of the BEST five (5) in Africa, went on to post:

“NOW THAT THIS IS DONE, OUR ECONOMIC RECOVERY IS BACK ON TRACK.”

First of all I hope people are aware that one of these Eurobonds was due for repayment in 2022, another one in 2024 and the third in 2027.

WHAT IS DEBT RESTRUCTURING IN SIMPLE LANGUAGE?

It is about changing the terms of the loan or bond agreement to give the debtor or rather the borrower some breathing space.

Debt of the magnitude that Zambia has is; to use President HH’s words, like a constricting python which chokes and suffocates making one to fail to breath freely. When debt repayment (instalment) is due, the borrower has to go out of his way to look for resources (money) to pay. At business level, it means foregoing a lot of things, harnessing, combing every available resource in order to pay the creditor or the lender. It means foregoing, if you are a vendor, purchases for your business, or raw materials for your manufacturing business. If you cannot make such purchases for your business, it means your business will not grow and if the business cannot grow, it means you may not be able to meet other business expenses like wages, rent etc. which may in extreme cases lead one into bankruptcy (or insolvency).

At country level, this is the situation Zambia in 2020 found itself in (when it defaulted or rather failed to pay the US$42.5 million instalment).

If Zambia under President HH’s administration did not engage in serious negotiations with the creditors for Debt Restructuring, the two Eurobonds, that is, US$750 million Eurobond falling due in 2022 and the US$1 billion falling due this year, 2024 would become payable yet Zambia had no capacity to liquidate these two debts at this point in time.

Suppose there was NO Debt Restructuring negotiations going on initiated by HH’s administration with the bondholders, the US$750 million Eurobond due in 2022 (which translated at XD rate of K16/US$ = K12 billion) would become payable followed by the US$1 billion which was to fall due this year 2024 (K25 billion). But because there was a MORATORIUM (i.e. a legal authorization to DEBTORS/BORROWERS to postpone payment) during the negotiations, payment of the US$750 million due in 2022 and the US$1 billion due this year 2024 was suspended.

Without this MORATORIUM, Zambia would have had to struggle to find money to pay these two DEBTS as they fall due. This would have thrown our national budget as presented to Parliament into a quandary.

Can you imagine out of a total budget of K173 billion in 2022, K12 billion representing the US$750 million Eurobond, had to be sliced off to pay this DEBT (bond), what would have been the implications, the ramifications and the consequences of this to the Zambian economy in general (and the Zambian people in particular who were already grappling with the high cost of fuel and a global economic crisis exacerbated by the Russian/Ukraine war and the Covid Pandemic. This was enough to wipe off the allocation to the education sector (K8 billion) and almost 50% of the Health Sector of K13 billion. What of the US1billion (K25 billion) Eurobond due this year 2024? In the same manner, the US$1 billion (K25 billion) bond due this year would have wiped off the whole K21 billion health budget allocation plus K5 billion of the education allocation.

To make matters worse, had the debt restructuring deal fallen through, that is, if it was not clinched, Zambia would have this year 2024 to cough out US$4.9 billion (equivalent to K122.5 billion at the current exchange rate) according to the Minister of Finance, Dr. Situmbeko Musokotwane’s revelation to ZNBC on Sunday Interview. This would be equivalent to 70% of the 2024 budget. This would have wiped out the whole of our projected revenue generated from taxes which were projected at 64% of the total generated revenue. This is what the debt restructuring breakthrough has avoided and THIS IS THE REASON FOR CELEBRATION, IT IS THE REASON FOR THE EXUBERANCE exhibited by the students from higher learning institutions when they visited H.E. President HH at his residence the other day.

Surprisingly, when it looked like the DEBT RESTRUCTURING DEAL WAS GOING TO FAIL, SOME DOOMSAYERS, INCLUDING SOME OPPOSITION LEADERS WERE CELEBRATING THE FAILURE OF THE RESTRUCTURING DEAL.

Unfortunately for them, they celebrated too early because they underrated President HH’s astuteness, determination and negotiating ability. Flanked for that matter by his able Minister of Finance, Dr. Situmbeko Musokotwane and his team at the Ministry of Finance.

The author is the Deputy Secretary General for the United Party for National Development (UPND).