Repayment Concerns Grow After Decade Of Debt
As 2020 dawns Government debt stands at approximately 90% of GDP. The figure was nearer 20% in 2010. As repayment deadlines draw nearer, concerns are mounting regarding the ability of the Government to service its debt after a decade of heavy borrowing.
In the past month the African Development Bank (AfDB) confirmed that the Government had defaulted on the repayment of a US$1.4 million loan. While the debt has now been repaid, and sanctions lifted, the episode has further shaken confidence in the ability of the Treasury to pay up. The AfDB loan of US$1.4 million is small in comparison to the Eurobond repayments due, which total US$750 million in September 2022 and US$1 billion in 2024.
Speaking on the subject ACTIONAID Zambia country director Nalucha Nanga Ziba is quoted as stating, “This situation is of great concern on account of the following: Zambia Eurobonds are due to be paid in 2022 & 2024. The situation with AfDB shows we do not have funds reserved for debt servicing. Instead it seems that we rely on attempting to raise funds when loans are due to be paid.”
“The much talked about sovereign fund seems to be hoax as the AfDB situation just shows that there is no money in the sovereign fund,” Ziba wrote on Facebook.
In a recent report from international ratings agency Fitch, the organization cautioned on Zambia’s substantial external debt obligations over the next couple of years. It forecast general government debt (including arrears) to rise to 87.4% of GDP at the end of 2019, more than twice the end of 2014 level of 32.3%.
With trouble accessing external financing Fitch also cautioned that in order to fund expenditure it is likely that the Government will have to rely heavily on the domestic debt market, with weighted average interest rates that have risen to 24.7% for Treasury bills and 30.8% for bonds.
Fitch also calculated that in 2020 Zambia will have to meet an estimated US$1.5 billion in public external debt servicing, including interest payments.
