Private Sector to Assist Zambia's Recovery with Financial and Technical support

Following Zambia's restructuring of its $6.3 billion debt under the G20 Common Framework, the nation continues to receive backing from both regional and global foundations. These institutions will guide Zambia in following the agreed debt arrangement, ensure that the country maintains their obligations to private commercial creditors (including Eurobond holders) and assist in implementing essential reforms for the country's economic recovery and development.

Last week, the African Development Bank Group (AfDB) convened meetings in Lusaka, gathering representatives from the United Nations, the European Union, the International Monetary Fund, the World Bank, foreign governments (including the United States and the United Kingdom), and the private sector.

The purpose of these discussions was to provide Zambia with a network of both financial and technical support. The delegation, led by AfDB President Dr Akinwumi Adesina, emphasized the importance of making the debt treatment successful, and preventing Zambia from falling to a future debt crisis.

Adesina outlined several programmes which intend to provide Zambia with a total of $318 million, subject to approval by the Bank's Board of Directors.

Of this sum, $150 million will be directly given to financially support Zambia, with the remaining $168 million to be taken from the African Development Fund to sponsor the improvement of Zambian infrastructure.

Jacek Jankowsk, the Head of the European Union delegation and the Common Market for Eastern and Southern Africa, stated that in addition to the €299 million given as budget support by the EU, “the European Union will provide €60 million for health and education, €30 million for the rehabilitation of the Kariba Dam and the remaining €20 million will support smallholder farmers”.

Likewise, the World Bank and IMF have contributed $275 million and $1.3 billion respectively in support of the Zambian government’s reforms to stimulate private sector-led growth and decrease public debt.

IMF Resident Representative, Preya Sharma explained that these reforms are an essential part in revitalising the Zambian economy. She praised the country for “undertaking large and important reforms including the removal of fuel subsidies, improvements in public debt management and governance”.

The majority of Zambia’s external debt is currently held by bilateral creditors, but there was a significant growth in private debt that nearly tripled within six years to $18.8 billion in 2020.

This debt, described by President Hakainde Hichilema as a “python”, has been the central burden of Zambia’s current government. Hichilema explained that for the first two years of his administration “It was impossible to do anything”, he added that “We have lost a lot of time under the python of debt. We want the economy to function to help the government deliver for the people of Zambia”.

Zambia requires formal assistance and guidance in implementing the reforms Hichilema intends to make in sectors such as public financial management, public debt management, public investment management, procurement process optimization, bolstering public-private partnerships, domestic resource mobilization, and corruption prevention.

Adesina urged private sector CEOs to seize emerging opportunities and increase investments in the country. He cited the agriculture sector as an example, where the Bank will assist Zambia in reforming its farm input support program for greater efficiency and transparency. The support will be channeled through the private sector, utilizing biometric registration of farmers and electronic vouchers to directly deliver aid to them. Meanwhile, Chabuka Kawesha, the president of Zambia's Chamber of Commerce and Industry, highlighted the energy sector's weaknesses, particularly in power delivery and transmission, which are crucial for boosting power generation.

Ultimately, Development partners firmly believe that President Hichilema, a successful businessman and farmer, will establish the essential conditions for the private sector to take a leading role in investing in key sectors of the Zambian economy such as, finance, transportation, energy, and mining.