Minister Hoping to Restructure Foreign Debts by Early 2023 as Negotiations With China Continue

Zambia’s finance minister has told Reuters the country is on track to restructure its foreign debts during the next financial quarter.

The country owes approximately $15 billion in external debt, much of which is set to be renegotiated in the coming months and years in line with fiscal recommendations made by the International Monetary Fund (IMF).

Having defaulted on its sovereign debts in 2020 under the watch of former president Edgar Lungu, the New Dawn administration is determined to rebuild Zambia’s mismanaged economy. In August a $1.3 billion dollar loan was agreed upon with the IMF in order to help restructure the nation’s debt in order to reduce repayment obligations and free up funds for upfront fiscal stimulus.

Situmbeko Musokotwane, Minister of Finance, confirmed that “the Chinese… are asking (for) a number of clarifications, which us and the IMF are providing them.” Chinese creditors, represented by Export-Import Bank of China are seeking increased clarity on the assumptions made by the IMF that form the basis of the debt restructuring negotiations.

Almost $6 billion of Zambia’s debts are owed to Chinese creditors, but Musokotwane assured the media the two countries are “in active engagement” over any clarifications required and in identifying the next steps towards restructuring.

Zambia needs to reduce its debt of $6.2 billion by 2027, or to have 49% of its debt restructured, in order to meet IMF targets and to continue progress with the government’s Eighth National Development Plan. Hichilema wishes to see Zambia become a middle-income country by 2030 and responsible debt servicing is understood as crucial to the stability required to achieve that goal.

Musokotwane indicated that he wished to make an announcement by Q1 of next year regarding new investment into Konkola Copper Mines and Mopani Copper Mines. Such news would prove a significant boost to the Zambian economy. Zambia is already one of the world’s largest copper producers but the New Dawn administration is seeking to treble copper production to 3 million tonnes per year.

“We are hoping that by the first quarter of next year we should be there with some of them. And also some of the new investments that are coming from the U.S. and other places”, the minister said.

The Zambian economy has received significant investment from abroad, seeing $1.1 billion in development pledges in Q3 according to the country’s development agency - the ZDA.

On top of this, the Zambian government is actively working to improve the regulatory environment in the country in order to boost investment. Just this week the Zambia Economic Growth Forum was held and development projects were agreed upon with USAID with both focusing on the barriers to economic growth and identifying possible areas of policy reform. In March next year the London-based investment platform, Invest Africa, will visit Zambia in order to assess business opportunities in the country. Invest Africa CEO Karen Taylor has previously described Zambia as ripe for investment since the improved environment created by president Hichilema.

Analysts across the world are watching Zambia’s negotiations with China very closely. The nation’s debt restructuring is seen as a test case by experts who are expecting a series of economic defaults from poorer nations across the world.