ECONOMIST Chibamba Kanyama says government should focus on holding discussions with Eurobond holders and Chinese creditors for a possibility of debt suspension or rescheduling.
President Hakainde Hichilema recently announced that government had signed the Debt Service Suspension Initiative (DSSI) with a number of lenders who include members of the Paris Club, Kuwait Fund, Saudi Fund, DBSA, among others, as part of their debt management and negotiation.
But in an interview, Kanyama said the Eurobonds and the Chinese commercial debts were more problematic.
“This is a good initiative. I am sure that there are very intensive behind-the-scenes discussions to reschedule much of this debt, if not suspension or cancelation where it is possible. Given the international goodwill that Zambia has, I think that most of these countries will reschedule or even cancel some of the debt. The only thing I see is that we were not told how much was involved because the countries covered here don’t appear to be problematic on our side. Debt is debt, it doesn’t matter where it has been acquired from but the sources differ, Eurobonds are much more demanding depending on the obligations than the other private debt, by virtue of what they are,” he said.
“Commercial bonds are problematic, they have much more serious impact on the government, rescheduling on such debt is nearly impossible unless there is a huge penalty to it. Negotiations are even much tougher. So, the two-problem debt in my opinion, the Eurobonds and the Chinese commercial debts, this is where we have serious challenges, this is where the sovereign factor plays in. The other debts mentioned, the Paris Club, these to me appear to be non-commercial debt, they appear to be bilateral debt, country to country these are easy to negotiate. They can even be cancelled depending on the circumstances.”
He said government would have based its decision to maintain Lazard and Highgate on their performance in restructuring the country’s debt and not on contractual obligations.
“So the actual figure has not been disclosed, it will be important that government articulates and outlines how much is involved in this debt rescheduling that has been announced by the President. We want to know how significant it is, it is very difficult to state the impact right now, how much is involved and what has actually been agreed. We are all looking for a transparent debt restructuring strategy, we have returned Lazard and Highgate, the two debt restructuring firms. These were hired by the previous regime and this government has continued with them,” Kanyama said
“Looking at the statement by the Minister that we will continue with them because of the contractual obligation already, I will say that the government should even be saying ‘we will continue with Lazard, we [will continue] with Highgate because of the contractual obligations’, no! They should be saying ‘we have found value in what they are doing’. The Minister should be saying that we have found value in the initiatives that they have undertaken and what they are undertaking. The only concern for us is that they are not hitting the debt that will have an impact.”
Kanyama said there was need for a transparent debt restructuring strategy.
“So this is why we need a debt restructuring strategy by the debt consulting firms, I think this time we want more transparency. The creditors are looking for transparency and we also as a nation want more transparency to really understand what is at stake. Why aren’t we getting a real breakthrough, we have no real breakthrough with these two debts. The final message is that whether with the IMF or no IMF, we feel this government should ride on a good will. The good will that it is perhaps in a better position to manage the economy of Zambia and on its own bring about macroeconomic balancing that we talked about. The issue that concerned creditors before is that there was fiscal indiscipline,” said Kanyama.