The ministry of Finance is currently in the second phase of the three phase process of the debt restructuring which involves applying for a common framework and conducting a Debt Sustainability Analysis (DSA).
Speaking in an exclusive interview with the Zambian Business Times-ZBT, Ministry of Finance Permanent Secretary for Economic Management and Finance, Mukuli Chikuba said the Government was working with the restructuring advisor, Lazard frères during this phase of debt restructuring.
Chikuba said the second aspect of debt restructuring was currently underway and an update on what has been done so far will soon be issued. Zambia’s external debt currently stands at US$12.75 billion, with debt restructuring seen as a credible way to ease liquidity conditions in the Zambian economy.
“The debt restructuring process is being conducted in phases; the first phase (Phase 1) involved implementing a debt standstill, which Zambia got from most of official creditors and some of the Chinese who are commercial and other commercial creditors in Europe and America.
“The second aspect is underway and is being conducted now. It involves us applying for a common framework and doing a DSA which we have been working on in the past few weeks with the International Monetary Fund (IMF), a statement will be released once we are done with the IMF on that end,” he said.
Chikuba said the DSA would be shared with the creditors and the creditors will then take a view on how much of relief would be given within the framework.
He said Government would soon give an update on the development of each creditor, as it requests Zambia’s non-official creditors to form a London club for easy sharing of information.
“Updates on what is happening with each creditor regarding debt management will be shared with creditors while part of it will be posted on the Ministry of Finance website. We are working with Lazard within this space as the transaction advisor, and we will be sharing more information with creditors post what we are doing now.
“But the most critical part is on transparency, where we are with different creditors in terms of debt management. So the updates will be shared, these are updates on what is happening with each creditor,” Chikuba told ZBT.
Chikuba also said Government had requested the non-official creditors to form what is called a London club for easy sharing of information to non-official creditors similar to what the Eurobonds creditors had done.
“As you know, Zambia like most countries has many creditors and sharing information individually to the creditors can be very taxing. That information will be shared with them as soon as they are well organised and part of it will be shared on our website,” he token ZBT.
Once debt restructuring is concluded, it is expected that the economy will get relief and Ben unlocked, with more funds being made available for local and foreign payments over and above allocation for the high debt serving requirements.
However, there is need for the stability of the Kwacha, which is one of the main causes of the current debt repayment stress. Most of the taxes, high are the highest revenue generators for government in Zambia are collected in Kwacha.
A loss of value basically entails that more Kwacha is needed to service foreign debt which is mostly contracted in US dollars. Spend on Foreign payments for imports for essential commodities such as fuel also increase resulting in crippling imported inflation.
