National Restoration Party (NAREP) president Elias Chipimo says it is unlikely that Zambia will pay the first US$750 million Eurobond scheduled to mature in 2022.

On Tuesday, in Parliament, Finance Minister Dr Bwalya Ngan’du revealed that only US$10 million was saved in the Sinking Fund around three years ahead of a bullet repayment for the US$750 Eurobond.

Commenting on this in an interview, Chipimo said US$10 million was a ‘drop in the ocean’ and that government should change its approach towards repaying the Eurobond because this would have a trickle-down effect on Zambians.

“No, it is unlikely that given the current rate of savings on the part of government that is going to be possible for them to repay the initial eurobond repayment. US $10 million is a drop in the ocean; it sounds like a lot, but it is a drop in the ocean when you look at the repayment amount that is supposed to be due. So, there are not going to meet that even if we didn’t have (the 2021 general) elections, we didn’t have all these expenditure items to take care of. The reality is that the government has known this for a long time,” Chipimo said.

He, however, advised that government should consider refinancing by borrowing from another source in order to meet the intended target.

“They will have to refinance, meaning they will have to borrow from another source in order to repay the eurobond. Now, this is where the problem is going to be: the investor confidence and some of the steps that have been taken have to matter because when we borrowed that eurobond, the first one we are looking at repaying we borrowed at less than six per cent, meaning the interest now are around 20 something per cent, but that is not what we will pay as country; we will only pay that original five something percent. But if we have to refinance, which we have to do in order to repay that bullet (US $750 million) amount, we have to go to the market and we have to borrow at the rates that are existing now. So, it means that the interest will move from five per cent to 20 something per cent. And it is all the function of how much confidence we are giving the investor community as a nation,” he observed.

“And that is why things like wreckless expenditure, not managing our fiscal situation well and so in other words lots of government expenditure, overpricing of contracts, paying for things that we have not really planned for; all of these things have an impact on the way investors look at us and, therefore, the interest they demand when we have to go in the market to borrow again in order to repay the debt in 2022.”

Chipimo said the government should endeavor to ensure its stopped its wreckless expenditure if the prospect of refinancing will be successful.

“Already, we are feeling the pain of limited economic activities because of very little money in the system; a lot of it is being channelled on these projects, but those projects are being given to, largely, foreign nationals and those nationals don’t spend the money in this country, they spend only on what they have to; the rest, they are sending out. So, you have very little activity going on here. In fact, the only real activity going on is in the construction sector and a lot of it is that people are having to launder their money. So, we have a lot of illicit cash in the system and it is being used to construct properties. It sound like a good thing, but the danger is it is depressing the whole economy because a lot of illicit money quickly rising property means that rentals have now come down across the board. A lot of people who depended on rental income are now effectively having to lay off their workers because people are having to move out of their properties that were constructed out of legitimate money. And because of the economic slowdown, the poor access to money in the economy, people can’t borrow, it means that you will have a compounding effect of economic hardships that people are experiencing,” said Chipimo.