President Lungu Asks China For Debt Relief, Cancellation
President Lungu has asked China for debt relief and cancellation in a telephone meeting with President Xi Jinping on Monday of this week.
The two leaders discussed bilateral and multilateral cooperation, including in relation to the response to the fight against Covid-19, applauding the World Health Organisation (WHO) for its efforts. President Xi Jinping is reported as stating that the pandemic will lead to improved relations between the two countries.
President Xi Jinping noted the support countries such as Zambia provided to China in the early days of the virus, with China subsequently sharing expertise and anti-epidemic supplies in return.
President Lungu has asked for the debt relief and cancellation as a result of the reduced revenue expected in 2020 as a result of the pandemic so that funds can be prioritised on responding to the health and economic implications. Zambia’s estimated revenue for 2020 is predicted to fall by at least 20%, or K14.8 billion, as a result of Covid-19, Finance Minister Bwalya Ngandu has previously stated.
Before the pandemic Dr Ngandu had confirmed that external debt stock stood at US$11.2 billion, up from just US$1.9 billion in 2011.
President Lungu confirmed Zambia’s continued support for the ‘One China Policy’ and welcomed the recent introduction of the controversial National Security Law for Hong Kong, which makes it easier to punish protesters and reduces the city’s autonomy. He also stated that Zambia welcomes investment from Chinese enterprises and hopes to work more closely with the China in the future.
Earlier this month international ratings agency Moody’s released its latest annual report on Zambia to the market. Top of the update was reference to “unsustainable debt dynamics”. The agency noted that Zambia’s “credit fundamentals will likely remain very weak for the foreseeable future.”
Moody’s said that Zambia’s weak credit profile means that debt restructuring is likely to address debt sustainability challenges. It also wrote that debt affordability is deteriorating, and refinancing risks are rising amid weakening financing conditions.
“The slippage and accumulation of arrears underscore Zambia's weak government effectiveness, which has prevented quick and decisive policy action to confront the challenges stemming from rapidly increasing debt. Moody's expects the persistently large budget deficit and exchange rate depreciation to push the debt burden above 110% of GDP this year,” a release on the report stated.
In June Government confirmed the appointment of French firm Lazard Freres for advisory services relating to liability management of its debt portfolio.
Among the debts scheduled to mature in the coming months and years are the Eurobonds, which will see around US$750 million debt mature in 2022, followed by US$1 billion in 2024 and US$1.25 billion between 2025 and 2027.