Many have been disappointed with the failure of Hakainde Hichilema and his United Party for National Development to capitalize more effectively on the PF’s record, says Africa Confidential.
And Africa Confidential says President Edgar Lungu’s uproar with former US Ambassador to Zambia Daniel Foote embodies the atmosphere of intimidation and intolerance that is becoming the hallmark of his tenure.
Meanwhile, Africa Confidential says Zambia’s current economic crisis leaves little hope that the country will successfully pay off the first US $750 million Eurobond due to mature in September, 2022.
In its latest publication, Africa Confidential argued that oppositionists believed UPND would do much better this year in terms of capitalizing on PF’s record.
“Many have been disappointed with the failure of Hakainde Hichilema and his United Party for National Development to capitalize more effectively on the PF’s record, but oppositionists believe it will do much better this year,” the report read.
And Africa Confidential stated that intimidation and intolerance were becoming the hallmark of President Lungu’s tenure.
“The Foote furor embodies the atmosphere of intimidation and intolerance that is becoming the hallmark of Lungu’s tenure, say local commentators. Support for the PF has been steadily declining since Lungu’s victory in 2015 and the PF has responded with efforts to force loyalty and silence dissent (AC Vol 59 No 18, Graft worsens cash squeeze). The fragile economy leaves the PF’s electoral war chest vulnerable as the 2021 election draws nearer. Commentators have remarked that President Edgar Lungu is being distracted by pointless quarrels, such as his spat with United States ambassador Daniel Foote over the latter’s publicly expressed dismay with the sentencing by the courts of two gay men to 15 years in prison,” read the article.
“Lungu demanded Foote leave and he was recalled in late December. Foote also accused the PF of corruption, further raising the government’s ire. Even though the US provides $500m a year to Zambia in HIV/AIDS support, Foote did not to attend ceremonies for World Aids Day on 1 December because of threats against him. Foote said Lungu’s government ‘wants foreign diplomats to be compliant, with open pocketbooks and closed mouths’, and suggested that relations with the US were strained.”
Meanwhile, Africa Confidential stated that Zambia’s current economic crisis left little hope that the country would successfully pay off the first bullet payment of US $750 million Eurobond due to mature after next year.
It also observed that an IMF programme remained unlikely given the government’s obsessive appetite for more borrowing.
“Such is the quantity of Chinese debt that financial analysts say it should be the priority for restructuring, but apart from vague talk within the Ministry (of Finance), no progress has been made in this direction. However, Eurobond holders expect this to be done before Zambia attempts to restructure its US $3bn debt to them. The current economic outlook leaves little hope that Zambia will be able to pay the US $750 million due in September, 2022, for its first of three Eurobonds, so a restructure is imperative although it could come at heavy cost. An IMF programme remains unlikely given the government’s determination to continue borrowing,” read the article.
“In this difficult economic climate, debt service could exceed 50 per cent of the monthly budget, yet the government is still borrowing – as it has since 2017 (AC Vol 58 No 25, Stumbling into a Debt Crisis). Since then, official debt-to-GDP has risen sharply in line with the debt already contracted in 2017. Now, the IMF expects it to exceed 90 per cent at the end of 2019 – up from 78 per cent in 2018. Finance Minister Dr Bwalya Ng’andu wrote to several lenders in November to cancel the disbursement of funds in an effort to honor a pledge to stop the debt ballooning further, Africa Confidential has been told. But the high interest rates secured by the lenders because of Zambia’s poor credit rating means their appetite for lending continues. After complaints to State House from lenders, Ng’andu has been forced to allow the disbursements to go ahead. Political pressure on the bank for disbursements to continue regardless of the bank’s advice is a historical problem that is likely to persist.”
Africa Confidential projected that Zambia’s debt-to-GDP ratio was expected to worsen this year and hit 100 per cent.
“The ruling Patriotic Front’s continued state of denial about the country’s dire debt situation sees the year begin with loan defaults, dwindling state revenues, disintegrating public services and unpaid civil service salaries. The government’s failure to make a €6 million loan repayment on its military transport aircraft – one of a raft of delayed loan payments, including to Chinese lenders – signals immense pressure on the state coffers. Debt is expected to worsen this year and approach 100 per cent of GDP. The government has withheld all other payments, including public salaries, rather than miss a debt repayment. But the government now has to foot the bill for millions of dollars of unplanned payments after becoming embroiled in expensive litigation and trying to alleviate politically dangerous power shortages,” it disclosed.
Africa Confidential also reported that works on Zesco’s Kafue Gorge Lower hydropower station had stalled because of delayed payments to contractors and lack of funding.
“While disbursements on new projects continue, others, such as Chinese-built roads and airports, have stalled because of delayed payments to contractors and shortages of financing. Construction of the US $2bn Kafue Gorge Lower hydropower station, which was expected to start generating power this year, is stalled after State power company Zesco failed to secure further financing. Zesco had created a special purpose vehicle through which to borrow for the project, with more than US $1.2 billion already disbursed. But Chinese insurer Sinosure has refused to underwrite a further loan, we understand, leaving the project in limbo. The contractor, Sinohydro, is also Chinese. Sources dealing closely with the Chinese companies say that Zambia’s financial predicament is causing tension between them and their insurers and lenders,” stated Africa Confidential.