THE Centre for Trade Policy and Development (CTPD) says government needs to be more serious if its intentions are to be trusted as it engages with creditors.
In a statement, Wednesday, CTPD researcher Wakumelo Mataa said there were too many contradictions in the manner in which government was handling resources.
“We find it contradictory that, while we have based our request for debt service relief on the devastating economic impacts of the COVID-19 pandemic, the latest Auditor General’s report reveals serious irregularities in the usage of funds intended to mitigate its impacts on the economy. It therefore cannot be over-emphasized that Government needs to be more serious if its intentions are to be trusted as it engages with our creditors. There is need to ensure logical consistency in Government’s understanding and appreciation of the prevailing macro-economic problems and consequently, in coming up with solutions to resolve them. It is imperative to note that Zambia’s Bondholders may also be concerned about the political economy going into the 2021 general elections as this has seemingly made Government reluctant to slow-down on the ambitious infrastructure and policy reform agenda. Should the bondholders reject Zambia’s DSSI request, there will be a negative impact on social spending implying that less funds will be available to spend on initiatives that help reduce poverty or support job creation in the country due to higher interest payments on increased debt,” Maata stated.
“It is our considered view as the Centre for Trade Policy and Development (CTPD) that the decision of the bondholders will, to a large extent, be influenced by the creditor’s level of confidence in Zambia’s debt transparency and the way Government proposes to deal with the debt situation. It is expected that, being major creditors, China’s recent willingness to grant a debt relief will be crucial to the decision of the bondholders as they will most likely take into consideration, the lack of publicly available information on the terms and conditions of Chinese loans.”
Mataa expressed concern that government had not mentioned the amount involved in the deferment agreement with China Development Bank (CDB).
“We find it progressive that Government through the Ministry of Finance has reportedly reached an agreement with the China Development Bank (CDB) to defer debt service in respect of a commercial loan facility. We however remain greatly concerned that the MoF makes no mention of the amount of the loan(s) in question as this would have helped quantify the amount of relief given. Moreover, there are still serious concerns about the actual scale of the debt that Zambia owes China. Furthermore, it is our expectation that the bondholders will be looking forward to a clear and realistic economic recovery plan,” stated Mataa.
“In this regard, Government will be expected to be emphatic on what it intends to do within the relief period that will point the economy towards recovery and restore debt sustainability. It is imperative that Government commits to prudent utilization of the resources that may be freed up from this initiative should this request pull through, directing a larger part of the resources into productive sectors. It will be sad for Zambia if the creditors reject the request for relief as this will mean that Zambia has defaulted on its debt obligations that were due on the 13th of October, 2020.”
The Ministry of Finance, begun the process of engaging all creditors to seek their approval for suspension of debt service payments for a period of six months in accordance with the terms of the G20 and Paris Club Debt Service Suspension Initiative (DSSI) and feedback from bondholders is expected during the ministry’s meeting with the note holders scheduled for Friday, 13th November, 2020