ECONOMIST Trevor Hambayi says there is need for government to have a proper strategy in place on what it will do once creditors grant the much-needed moratorium on interest payments to avoid the risk of a debt repayment freeze not benefiting the country.
Ahead of a crucial vote from Eurobond holders set to decide on whether to grant the Zambian government a six-month debt repayment freeze this month, Hambayi urged government to have a strategy on how to best utilise a possible moratorium on debt interest repayments as it may prove insufficient to help provide much-needed fiscal relief.
“We don’t have that debt repayment strategy so even this six months that we are asking relief for, we don’t know whether it is enough. We can only know when we have by being transparent. So, I don’t even understand why we are asking for six months because in six months, we might be in a worse off position than we have been before. Everybody is talking about having to get some debt extension and it all seems to be falling in the six months,” Hambayi observed.
“It’s still not going to be easy for us to pay back the debt after six months because there is no strategy. We don’t have a long-term plan, which should say, ‘this is how much we are going to pay back.’ So, there are two sides to this, in terms of the bondholders, you will realise the one that are really holding our bonds we were the first ones who were saying that they could not give relief because they thought we might take their money to service debt liabilities with the Chinese debt.”
He added that there was need for government to demonstrate that the funds realised from debt relief would equally not be used to meet other debt obligations.
“But one of the key aspects why this is arising in the first place is the degree of transparency that we have regarding the Chinese debt. But if the international community as well as bond holders, including the IBA where the IMF falls, fully understand what the debt position is, and the conditions under which we are taking the Chinese debt, then this issue would not be arising. But you realise that in the last few weeks, the Chinese have agreed to give Zambia some degree of relief to some of the debt with the Import and Export Bank,” Hambayi said.
“But the problem we have is transparency with all the debt that we need, and bring that to the table so that people can see which debt we have been able to negotiate relief and which ones we have not negotiated relief so that the partners on the bondholders know the liabilities and what they are going to be.”
He also stressed the need for government to have a debt repayment plan that could be availed to creditors.
“But other than that, the issue that also comes into play is what our payment plan would be because while they are talking to these partners, we should have been saying, ‘our payment plan is for this value, and this amount that we have to pay…’ and agree what is acceptable to all of them. Key problem is just transparency and that has also been the issue with the IMF. Then we need to know the kind of loans we have with the Chinese: is it concessional or is it commercial? And then we need fiscal consolidation, and expenditure to our capacity,” said Hambayi.