Zambian Government Debt stands at $9.7 billion
Documents from the Ministry of Finance shows that Zambia’s total public debt is $9.75 billion dollars. This debt is made up to $6.05 billion external debt and $3.7 billion domestic debt. The total public debt has increased from $3.5 billion in 2011 to about $9.75 billion today, an increase of 176 percent. The debt has risen by 176 percent since 2011, and analysts say that the state does not have the means to repay it.
Zambia has three outstanding Eurobonds, the first for $750 million issued in April of 2012, the second for $1 billion issued in June 2014, and the third issued in July 2015 for $1.25 billion.
But the country will struggle to pay the interest on these bonds, according to the Zambia Institute for Policy Analysis and Research (ZIPAR), which estimates annual interest on the bonds at $240 million. The amount required to service interest and repay the principal is about $440 million annually, according to the institute.
Because the Eurobond debt is in dollars, the government will have to pay considerably more in the weak kwacha which it earns – the Zambian currency has lost about 30 percent against the dollar in 2015.
But this is not the only portion of the debt that poses challenges for repayment, according to Economic Association of Zambia (EAZ) President Chrispin Mphuka. “It is most likely, the Zambian government in its current form will not be able to raise the outstanding debt contracted to our Chinese lenders. The government will have to contract more debts to settle these loans,”
According to Mphuka, there is a shortfall of $642 million in the funds provisioned to completely settle the over $3 billion debt the Zambian government owes to China.
“The economic slowdown resulting from depressed commodity prices and low productivity has put the Zambian government under serious financial stress, and revenue collection has not only been compromised, but significantly reduced,”
A study carried out by the Jesuit Center for Theological Reflection (JCTR) in 2014 revealed that government debt contracted between 2012 and 2013 was spent servicing loans made between 2003 and 2005.
By Dr Cholwe Beyani