The African Development Bank (AfDB) has put Zambia under sanctions for failing to repay its loans contracted to implement various developmental programmes, according to the Ministry of Finance.
In a statement released, Tuesday, the Ministry of Finance admitted owing the financial institution an outstanding US $1.4 million, but stressed that the reason for defaulting was on account of the kwacha’s depreciation against major convertible currencies, which had pushed the cost of repayment in local currency higher.
The sanctions entail AfDB suspending the release of funds to Zambia on all existing projects funded by the Bank and not approving any new loan or project to Zambia.
Zambia joins Zimbabwe, Somalia and Sudan on the list of blacklisted countries.
But the Ministry of Finance stated that government’s default should not be a cause for alarm or panic by any stakeholder, stressing that the US $1.4 million balance will be cleared in due course.
“Government wishes to inform the nation that the information circulating on social media to the effect that the AfDB has put Zambia under sanctions for failing to repay loans should not cause any panic. Government acknowledges that the AfDB Group did write to the Ministry of Finance, yesterday, December 23, 2019, to inform the Ministry that as of yesterday (Monday) the Bank had not received full payment in respect of Bank Group bills. The Bank Group added that, in accordance with the Bank Group policy on loan arrears recovery, it wished to inform government that sanctions had been imposed on December 15, 2019. It was further stated that the Bank Group counted on government’s prompt action for the timely settlement of the amounts due to enable the lifting of sanctions,” disclosed the Ministry.
“The position of government on this matter is that payment of the outstanding amount of US $1.4 million is being processed and will be finalized as soon as possible. The delay in the settlement of the bill was due to the sudden depreciation of the kwacha, which increased the volume of the kwacha needed to settle the amount. It must be understood that the government budget is always in kwacha and if there is a sudden and significant adjustment in the exchange rate, the Ministry of Finance may experience challenges in meeting obligations payable in foreign currency. This is normal and may occur from time to time.”
AfDB is one of the major financiers of the Zambian government, having provided crucial developmental financial assistance since 1971.
Since then, the Bank had committed more than US $2 billion to public sector infrastructure projects, including agriculture, industry, water and sanitation, energy and transport.
Additional support from the Bank, valued at around US $150 million, had been allocated to the country’s private sector.
Zambia also benefited from debt relief valued at $452 million under the HIPC and the Multilateral Debt Initiatives.
In April, 2019, the AfDB approved $11.1 million to support Zambia’s public finance and economic management as part of efforts to restore fiscal stability and improve livelihoods in the middle-income bracket.
The AfDB Group is Africa’s premier development finance institution, comprising of three distinct entities: the African Development Bank (AfDB), the African Development Fund (ADF) and the Nigeria Trust Fund (NTF).
On the ground in 41 African countries with an external office in Japan, the Bank contributes to the economic development and the social progress of its 54 regional member-states.