Economy

Mwanakatwe Updates Parliament on Debt Situation

FULL MINISTERIAL STATEMENT

Mr. Speaker, I wish to thank you for giving me this opportunity to brief the house on the country’s debt situation. Sir, let me commence my address this afternoon by sharing with the Honourable members the status of Zambia’s debt stock as at end June 2018, which was the last reporting quarter.

 

  • The stock of external debt was US$ 9.37 billion. This represents 34.7% of GDP and was below the internationally agreed threshold of 40%;

 

  • The stock of domestic debt, in form of Government securities, was K51.86 billion. This represents 19.2 % of GDP. Kindly note that there is no threshold defined internationally on domestic debt;

 

However, the threshold for the combination of domestic and external debt is 56% of GDP. Against this threshold, Zambia’s combined ratio was 53.9% of GDP;

 

  • The stock of arrears stood at K13.9 billion or 5.1% of GDP; and,

 

  • The total stock of guarantees were US$1.2 billion or 4.4% of GDP.

 

Sir, I would like to assure the house and the nation that Government takes seriously, issues of debt sustainability. As a practical step towards ensuring that we are sustainable, Government conducts annual debt sustainability analysis (DSA) exercises to gauge the carrying capacity as relates to economic parameters such as GDP growth, reserves and debt servicing capacity. The DSA gives us an indication of the level of debt that is desirable to ensure that growth is not impaired and the drive towards poverty reduction remains unabated.

 

Mr. Speaker, the last such exercise was undertaken by the Government in the first quarter of this year. Upon the outcome of the DSA, the Government announced a number of austerity measures to mitigate against perceived risks associated with the debt going forward. The measures will address these risks and ensure continued sustainability through fiscal consolidation.

 

Sir, I would like to assure Honourable members that the Government has not defaulted on any of its external commitments and does not intend to do so. We are very much alive to the serious repercussions of any default, on the economy and on other borrowings we have made through cross default clauses contained in financing agreements. It is our undertaking that we abide by the provisions in our loan agreements by ensuring that we do not abrogate the provisions of our constitution that ranks borrowing as a priority constitutional call on our revenues.

 

Mr. Speaker, the past few days have seen high levels of public interest regarding the purported ceding of some strategic assets owned by the republic to foreign creditors. Let me take this opportunity to inform the house and the nation that Government has not pledged any public asset as collateral on borrowings it has undertaken.

 

As the shareholding minister in state owned enterprises under the powers vested in me by cap 349 of the laws of Zambia [minister of finance – incorporation act], and in my capacity as minister in charge of loan contraction and debt servicing as stipulated in the loans and guarantees authorization act and the public finance act, I wish to emphasize that:

 

  1. There has been no debt default by the republic of Zambia on debt obligations to the Chinese Government or to other lenders;

 

  1. The loan at the Kenneth Kaunda International Airport [KKIA] is still being disbursed by the lenders. In this regard, we have not yet started repaying the loan because the new airport terminal is still under construction;

 

  1. Zesco loans from Chinese lenders relate to the extension project for the Kariba North Bank Power Station and the Kafue Gorge Lower Power Station construction project, which two stations are independent of Zesco. Zesco only holds shareholding interest in the two power stations through separate special purpose establishments. Loan repayments for the Kariba north bank extension project are duly on course while loan repayments for the Kafue gorge lower power project have not commenced because the station is still under construction;

 

  1. With regard to the digital migration programme, a loan was obtained from china to ensure that the programme is implemented in the country. Government is servicing the loan and is on course with debt servicing. Zambia National Broadcasting Corporation (ZNBC) was never offered as collateral for the loan. Instead, ZNBC and star times of china created an independent special purpose vehicle called top star to implement the digital migration programme; and,

 

  1. For all other loans that have been contracted from the Chinese Government, the security on the loans is in form of insurance taken from Sinosure. For loans contracted by state owned enterprises, an insurance from Sinosure and guarantee from the Government are in place. Debt service for those that are due is on course.

 

In view of this, it is clear that no collateral in the form of public assets has been provided for borrowings and none of the sovereign guarantees has been called upon by the creditors. Therefore, the takeover of any asset by another Government is neither practical nor feasible.

 

Through you Mr. Speaker, the nation is informed that there has never been any discussion related to a debt/asset swap between the Zambian Government and any of its creditors, china inclusive.

 

Mr. Speaker, let me now address the issue of refinancing of the Eurobond that has equally raised interest. The Government has a full view on handling of the bonds and is committed to the repayment of its liabilities. We are thus cognisant of the need for a structured redemption plan that will ensure transparency and smooth processes for handling the redemption of the Eurobonds.

 

In this regard, the Government has defined a Eurobond redemption strategy (ERS) that will establish an optimal plan for redeeming our bonds. Once approved by cabinet, the strategy will be made public.

 

Sir, the Eurobond refinancing strategy gives an array of options that involve debt buy backs and refinancing options. I must point out that refinancing is a market practice that is not peculiar to Zambia and is consistent with the need for Zambia to have an instrument in the international capital markets that can be used to signal risk for the private sector.

 

Mr. Speaker, as we are undertaking these asset and liability management processes we are cognisant of the need for the country to maintain a stable macroeconomic environment, credible debt data, fiscal sustainability and a favourable credit rating. This is what will assure achievement of lower interest costs and longer maturities on the bonds.

 

The measures I announced in July 2018 are meant to ensure that we continue to achieve these objectives.

 

May I emphasise that any refinancing exercise will follow best market practice and will involve the consultation of bond holders with the investors getting full value of their investments.

 

Mr. Speaker, I would like to further inform this august house that the ministry of finance has now set a standard to be making reports on debt figures public, on a quarterly basis. This is meant to keep citizens and other interested stakeholders abreast of the developments on this topical issue that has attracted so much attention and interest. The quarterly releases are also meant to reassure and give those that are inclined towards skepticism an opportunity to benefit from facts that would satisfy their doubts, thereby fore-storing speculation.

 

Sir, let me conclude by mentioning that in order to address future misconceptions about Zambia’s external debt position, the ministry of finance has embarked on strengthening its reporting and communication policies to ensure that public debt information is availed to the public in a timely and credible manner.

 

Mr. Speaker, I will periodically be briefing the house on issues regarding debt sustainability.

 

Mr. Speaker, I thank you.

20 Comments

  1. maston

    Make up good job for better Zambia

  2. Razor

    Yeah that’s why the dollar is now at K11.50 And climbing. It’s not management but mismanagement of the economy.

  3. menomeno

    Problem ni koswe mukulu twakwata

  4. Gerald siachisandu

    Mwanakatwe you are doing nothing at that position i fire you

  5. Cry my beloved Zambian.

    External debt stands @ 34.7℅ of GDP 5.3℅ below the international agreed threshold Midway through the current term. Nde lolesha fye.

  6. captain chanda

    Thanks for putting the the issue of debt to those noise makers correctly. My advice to you honour, translate this information in bemba and in many known language In Zambia.

  7. Finance

    Looking forward for that time when our country will be able manage its own resources .

  8. looted

    These have managed to take Zambia down

  9. FuManchu

    Addressing the Zambian parliament and quoting the figures in USA Dollars when legal tender for the country is Kwacha, also statistically usage of percentages is nonsensical to the ordinary person on the streets as not everyone has the time to engage in analysis of the figures!

  10. Ambitious dreams

    The Honhas clear the air on some issues and its all good. I hope our leaders are working in best interest of Zambia including poor minority and should by any means avoid the ramping neocolonialism by denying foreigners acquiring land and take over our resources and exploit citizens as slaves.

  11. general

    Comment readers association of Zambia(C.R.A.O.Z)just here to read comments so make them brief and make sure u use the correct spelling #napita

  12. chidyamakanda

    Wen government of ours vomits, it’s wen we shall no the type if food eaten. It’s bad getting richer on top of we poor Zambian s. Everything has got its own result, let’s wait & see? Anyway, well articulated statement. Avoid not to backfire…..

  13. Matilda

    It’s a good step that we the citizen’s are kept informed of what is happening.
    How I wish we had a youth parliament…where we can form groups based on knowledge and talents and started doing something to better our lives and improve our economy rather than all the times borrowing….The people we borrow from are no different from us ..It’s just the determination and focus plus consistent that makes them to be on top.
    I wish we could embrace team work and push away selfishness and laziness.
    Myself I don’t joke about China taking over Zambia.. I love my country ….the bible says there is power in the tongue….one day one can get what they confess.
    Change start small …I wish we could stand up and do something for ourselves.
    One Zambia One Nation.💙

  14. mulenga

    Thats what educated people in zambia do just use educated language to confuse the un educated. GDP , inflation and so on. I am tired of such stuff peopel want to see development not in % but translated in reality. Why has it taken this arrogant govt all this long to make that statement about zambia s debt. we know they are lying whats on the ground is not whats in the speach. Posterity will judge the PF govt . Come 2021 . God bless this beautiful country.

  15. Abel

    Let he citizens be part of the governance let us change Zambia,what Government should put in mind is that even its citizens and the youths at large are the future leaders,don’t destroy the Hope of our beloved youths.When are we going to have a reality of things where it will Zambians first,not only in employment but also financial empowerment. See Americas economy was built by individuals,my appeal is even the Tax should be lowered so that many Zambians will have to opportunit to do businesses,hence Tax will be paid not a situation where Tax is high making few people to build businesses and only living it to foreigners. Thank you

  16. Petelo lastone

    Dont pretend as if things are ok you have done totally nothing in terms of governance

  17. Grant

    WHAT IS THE PER CAPITAL INCOME FOR ZAMBIA? COMPARE IT TO THE TOTAL DEBT AND DEVIDE IT BY THE TOTAL POPULATION AND THE CRY.

  18. Twapenga

    I passionately make an appeal to the Min. of Finance to fund LASF so that retirees can also be paid their dues. It appears in Zambia its a gravious sin to be retired.

  19. Gregory

    Terminologies we are lost and start saying its a good report. Ooor mother Zambia.

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