Government Cancels $2 Billion In Projects To Rein In Debt

The government has said it is cancelling more than $2 billion worth of projects financed by commercial loans in order to reduce the risk of accumulating more non-concessional debt.

On Saturday, the Ministry of finance published its medium-term budget plan, which included cancelling projects worth an estimated $2.1 billion.

The ministry’s plan also showed that Zambia’s economy is set to grow by 4% in 2023, then by 4.1% in 2024 and 4.4% in 2025.

A treasury spokesperson said the decision to axe projects formed part of a broader debt-restructuring process, adding that bilateral creditors would provide adequate financing assurances for approval of an IMF programme being discussed.

The source also said the government is in the process of changing the law to increase parliamentary oversight on borrowing.

The treasury’s medium-term macroeconomic objectives also include keeping inflation down in single digits, averaging 9.2% in 2023, 8.2% in 2024 and 7.3% in 2025. Plans show the government also intends to maintain currency reserves at three months’ worth of import cover.

Since taking office in August 2021, the New Dawn government has prioritised debt sustainability as a way of revitalising and restoring Zambia’s long-term economic outlook.

 It marks a strong change from the disastrous financial mis-management of the Patriotic Front, which oversaw external debts in excess of $17 billion. In 2020, the country became the first nation to default in the Covid-19 era.  

Now the government has secured a staff-level agreement with the IMF for a $1.4 billion extended credit facility. Over the weekend, Zambia’s official creditors committee indicated it would offer the country financial assurances by the end of the month, paving the way for a fully debt-restructuring deal under the G20 framework.