From the onset, I am sure you are aware by now that both the Minister responsible for Finance and the Governor of the Central Bank have admitted that our debt is unsustainable. For me, that is a starting point in the right direction. In as much as we may not agree with the route that has brought us here in the first place, and we are justified not to, there is no other way out of this quagmire than the pragmatic route the Ministry of Finance has taken to bring in a consultant of such standing in the international market to help Zambia restructure its debt.
If I was to begin with the Eurobonds, particularly the one which is due in 2022, more than eight institutions are involved; Citi Bank, Barclays Investment Group, JP Morgan and Bank of America to name a few. These institutions invested their clients money in the Eurobond market because the yields were attractive. For now, the IMF cannot be part of the restructuring process especially when it comes to private money due to the litigation risks therein.
How will this work? The consultant will be engaged by the Ministry but paid unpon delivery and this consultancy engagement may take two to three years before it is concluded. By implication, the consultant will have to pay for their own costs for now which includes but not limited to accommodation, air tickets and upkeep until the expectations of government are met. With the greatest respect to some voices calling for Government to give this assignment to Zambians, these conditions may be unbearable to our local consultants. In addition to that, certain discussions and engagements will require one to be members of associations where bondholders reside as the case is here with either ZICA or LAZ. It will be impossible for our local consultants to acquire practicing licences and expensive to outsource services in all the cities and countries where the bondholders are.
Like I said earlier, some of these institutions have invested their clients money and have a schedule of payment in place. If our debt is restructured, how do they pay their clients who are retired and depend on their investment to make ends meet? This kind of assignment has to be undertaken by a reputable institution with presence in many countries so as to avoid loss of time and costs associated with travelling, accommodation and air tickets. Moreover, there is also an element of networking as the international financial system is a closely knit community which is not open to outsiders. And relationship, both formal and informal, is a key currency not just technical skills or academic qualifications.
You may wish to know that Lazard’s Financial operating revenue is $1.36 billion and its assets under management were sitting at $246 billion as of 31st December 2019. And Lazard has consulted for the following Governments; UK, USA, Australia, Ethiopia, France, Italy, Togo, DRC, Serbia and Mozambique amongst others.
Empowerment is key for local Banks and individuals and what Government should do is to ensure that Lazard picks a local team that will have access to its networks and body of thought when it comes to handling such transactions.
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