President Edgar Lungu’s announcement of a Turkish firm which expressed interest in refinancing Zambia’s US$750 million Eurobond maturing in 2022 is not a signal of failure, says Finance Minister Margaret Mwanakatwe.

And Mwanakatwe confirmed that a high-level mission will travel to China next month to firm-up discussions on refinancing portions of the country’s Chinese debt following President Lungu’s announcement on July 11 where he assigned five Cabinet Ministers to China.

Meanwhile, Mwanakatwe has projected that Zambia’s debt accumulation will slowdown in the next two to three years given the implementation of austerity measures.

In a press release issued yesterday, Mwanakatwe explained that the operation to engage an unnamed Turkish company, which President Lungu hinted had expressed interest in refinancing Zambia’s US$750 million Eurobond on Saturday, was not a signal of failure that the country had failed to honour its debt obligations.

“The government wishes to emphasise that such an operation is NOT IN ANYWAY a signal of failure to repay the Eurobonds. We remain fully committed to meeting all our liabilities ON TIME AND IN FULL,” Mwanakatwe insisted.

While she couldn’t name the Turkish firm yet, Mwanakatwe assured that the Zambian government would not take unilateral action should the deal to refinance the first Eurobond materialise.

“Whilst we are open to discussing financing of the Eurobonds to achieve lower costs and longer maturities with potential investors, this exercise will be done in full consultation with the bond-holders and in accordance with international market standards. If the offer from Turkey crystallises, no unilateral action will be taken by the government. We stand by the commitments made to bond purchasers’ at the time of issuance of the Eurobonds not to take any action without consulting holders of Zambia’s bonds,” Mwanakatwe added.

She stressed that government had developed a redemption strategy on the repayment of the bonds.

“In line with the foregoing, we have developed a redemption strategy for the three Eurobonds. The strategy is currently undergoing integrity reviews PRIOR TO SEEKING CABINET APPROVAL. Further, the government is in the process of engaging financial advisors on implementation of the strategy,” she stated.

“In so doing, however, we are duty-bound to interrogate any other asset/liability proposals that may come from other private and bilateral partners, with the proviso that it should be cheaper and procedural in terms of international capital markets operations.”

And Mwanakatwe confirmed that a high-level mission will travel to China next month to firm-up discussions on refinancing portions of the country’s Chinese debt.

President Lungu’s pronouncement, issued through his Special Assistant to the President for Press and Public Relations Amos Chanda on July 11, was dismissed as “fake news” by Chief Government Spokesperson Dora Siliya last week.

“As directed by the Republican President, we are proactively undertaking a rigorous asset/liability management exercise. Specifically, the government is advanced in preparing for discussions with the Government of the People’s Republic of China to refinance portions of the Chinese debt, particularly those with a medium-term maturity profile. This will ultimately create positive and smooth cash flows,” Mwanakatwe stated.

“A high-level mission will travel to China in August, 2018, to firm-up the discussions in order to create positive and smooth cash flows. I will lead the team to China. I will lead the team to China.”

Meanwhile, Mwanakatwe projected that Zambia’s debt accumulation will slowdown in the next two to three years.

Reacting to the two credit rating agency downgrades, Fitch Ratings and Moody’s, who forecast a negative economic outlook owing to continued uncertainty about the government’s commitment to consolidate public finances and a high public debt burden, Mwanakatwe insisted that the country’s debt accumulation will slowdown.

“On the external side, the government has begun to work on measures to define dedicated streams for reserve accumulation. This is being done side by side with the asset/liability management exercise on external debt and the cancelation and postponement of some pipeline loans. From the work we have done so far in implementing measures, Zambia’s debt accumulation will slowdown in the next two to three years,” stated Mwanakatwe.

“It is projected that we will attain a reduction in debt ratios after 2022. Given this scenario, fiscal slippages will recede and further, we do not see protracted debt because we will stand firm on our fiscal sustainability measures.”

Government is currently grappling with a huge debt stock, with the external public debt standing at US $9.37 billion by the end of the first quarter of this year, up from US $8.7 billion by the end of last year.

Domestic debt is equally growing at a fast rate to now hit K51.86 billion by June, 2018, from K38.6 billion in May last year, according to official Ministry of Finance data.

Other fiscal challenges also range to a widening deficit, together with an accumulation of arrears worth K12.7 billion it owes local suppliers.