Zambia’s External Debt Swells To Over US$9 Billion


Finance Minister Margaret Mwanakatwe has revealed Zambia’s external debt stock stood at US$9.37 billion as at the end of the first quarter of 2018.

Mrs Mwanakatwe also disclosed that as at June 2018, Government had paid US$161.3 Million in external debt service.

She said that total guaranteed debt was US$2.7 billion, of which US$1.21 billion had been drawn against the principal amount.

The Finance Minister added that the stock of domestic debt as at end June 2018 was K51.86 billion.

She further revealed that the country had US$1.82 billion in its reserves as at the end of June 2018.

The Bank of Zambia said in May that the government financed its current account deficit of $139.2 million in the first quarter of 2018 through a drawdown on international reserves.

Meanwhile, Mrs Mwanakatwe says Zambia will share data on its planned austerity measures with the International Monetary Fund (IMF) to get feedback on their appropriateness for macroeconomic sustainability.

In February the IMF rejected Zambia’s borrowing plans, saying they risked making it harder for the country to sustain its debt load.

An IMF team is expected in Zambia next week.

“We wish to state that as this work is proceeding, we will refrain from making public statements on this matter until we have a firm position with the IMF,” Mrs. Mwanakatwe said during a mid year state of the economy news conference.
Below are key highlights from Mrs Mwanakatwe’s briefing


• Finance Ministry remains confident that the annual projection of the revised growth of above 4% remains feasible as real sector indicators show a rise in economic activity in the first half of 2018.
• GDP growth will range between 4-5% in the medium term, driven by mining, tourism and construction sectors in a stable power supply and stable global development.
• Downside risks to the growth projections include volatility in copper prices, high lending rates and adverse weather conditions.
Fiscal performance remains satisfactory although adverse liquidity conditions has made financing difficult.


• Preliminary estimates for revenues and grants in the first half of 2018 amounted to ZMW25.07billion and were broadly in line with the period projections.
• Domestic revenues were above target by 3.3%, supported by positive performance of Value Added Tax collections.
• Lower than target performance was recorded in some revenue categories such as the income tax, customs and excise duties, export duties, non-tax revenues and grants.
In an effort to address some of the challenges associated with the low revenue collection in some tax types, government is undertaking measures which include:
• Use of electronic solutions in revenue collection including the telecommunications transaction monitoring system for mobile service providers and roll out of fiscal registers;
• Increased pace of implementing the land titling program which government is working with the World Bank;
• The recent change in the taxation for fuel importers to enhance excise duty collection.


• Total expenditure (including amortization) for the first half of 2018 amounted to ZMW39.6 billion, against the budgeted K34.19 billion. The major components which were above target were interest payments by 43.2% and capital expenditure by 65%.
• Going forward, expenditure control will be at the core to achieve fiscal adjustment given the tight financing conditions and higher deficit.
• In this regard, measures on enhancing payroll management, expenditure cuts in areas such as use of goods and services, progressing on procurement reforms and debt re-prioritization will be the focus for the rest of the year. This is meant to create a lower spending base as we get into the 2019 financial year.


Budget preparations have commenced with broad objectives which include:

• Increased revenue performance, particularly taking bold steps on non-tax revenue collection; ii. implementing in full measures announced by His Excellency the President while protecting growth and enhancing social protection; and
• Reducing Government borrowing, particularly in the domestic market.
• Cooperating partners have been involved in the preliminary work in the joint cluster working groups. The government has called upon economic players to make suggestions on how it can enhance the budget management and credibility.


• Inflation remained within the target range of 6-8% closing the period at 7.4% down from the May rate of 7.8%.
• For the rest of the year, the expectation is that inflation will remain within the programmed target.
• The low levels of inflation continued to support monetary policy. We however note that room for monetary easing is becoming tight amid government financing under tight liquidity conditions. Therefore, It government’s priority to scale back in domestic borrowing to help improve monetary conditions and lowering the cost of borrowing.
• Suffice to mention that further reduction in lending rates also hinges on implementation of the austerity measures to support fiscal consolidation.
• Foreign Exchange market and External Sector The Kwacha remained relatively stable against the major trading currencies during the first half of the year, trading at an average of K9.93 per US$.
• Trade deficit during the first five months of 2018 continued being positive with a surplus of K245.4 Million recorded in May 2018.
• Recovery in the performance of Non-traditional exports in the recent past has been recorded with the share of NTEs averaging of 22.9 percent in export earnings between May and April 2018.
• In view of the positive performance it is expected that the current account balance will further narrow down in 2018 and become positive over the medium term.


• The reserve position as at end June 2018 was US$1.82 billion.


• External debt stock as at end of first quarter was US $9.37billion. The slight increase in the debt stock was on account of disbursements during the review period.
• As at June, 2018, government paid US$161.3million in external debt service.
• Guaranteed debt was US$2.7billion, of which US$1.21billion had been drawn against the principal amount.
• Domestic debt stock as at end June 2018 was ZMW51.86billion.
• Domestic arrears in first quarter 2018 increased to ZMW13.91billion from ZMW12.77billion due to a rise in arrears related to roads and other RDCs.
• Arrears accumulation pace remains a source of concern to the state and commitment controls are being strengthened to avoid accumulation in RDCs.
• Road sector arrears are on account of more work being done as a result of payments made. The concentration of dismantling projects at 80% and above will address this problem going forward.


The government continues to implement policy and structural reforms key of which include:

• Reforms to parastatal bodies with attention being given to institutions such as ZESCO whose debt is high resulting in operations being unsustainable.
• Energy sector reforms that include reforming the fuel importation system and the completion of the cost of service study which has so far faced challenges that require resolution.
• Legislative reforms that form a cornerstone of fiscal sustainability. In the review period, the Public Finance Management Act has been signed into law, while the crediting reporting and Public Private Partnership bill are at an advanced stage in Parliament.
• Work on the enactment of the Planning and Budgeting bill is advanced with the aim of taking the bill to parliament as part of the budget legislation alongside the new procurement bill.

• Work on the Loans and Guarantees (Authorization) Act has been delayed due to reviews to the constitution.


• The state in in the process of implementing these measures, to achieve a new fiscal and debt outlook into the medium term. The measures announced are supposed to support growth and social protection going forward. Ongoing projects whose financing has been signed for will continue to be implemented as these will support growth going forward.
• The Ministry of Finance will be selective on the cancellation of current contracted debt which have not yet disbursed to address economic impact, financial and legal implications with the aim of freeing up cash flows by carrying out liability management on selected bilateral loans, both local and foreign in addition to extending respective maturity profiles. The state will target to reduce the pace of debt accumulation, and to smoothen the maturity profile, so that the government has more fiscal space, especially around the time of maturity of the Eurobonds.
• These measures should allow the country to revert to moderate risk debt distress and support fiscal consolidation.


• The MOF has taken measures to rein in on fiscal slippages and risks related to debt. These measures are now being incorporated in the fiscal and debt position for 2018 and over the medium term. It is this data that once completed will be given to the IMF for assessment measures to gauge the macroeconomic sustainability for Zambia.
• The MOF will, while work is proceeding, refrain from making public statements on this matter until a firm position with the IMF is settled for.


Implementation of the recent austerity measures will aid the sustenance of the macroeconomic environment, growth prospects and renewed confidence in the economy. Risks on the outlook include;

• Climate variability
• Failure to achieve structural adjustment measures over the medium term that may impact on growth or failure to address tight liquidity in the market to address the limited access to credit by private sector.

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