Zambia’s External Debt Hits US$11.2 Billion

Zambia’s Finance Minister Bwalya Ngandu has revealed that Zambia’s external debt stock now stands at US$11.2 billion.

According to Lusaka Times, this is an increase from the US$10.2 billion recorded as at end of July 2019.

Dr Ngandu was speaking in Lusaka Wednesday morning during a briefing on the performance of the economy.

“When I last updated the nation, in July 2019, the stock of external debt at end-June 2019 was US$10.23 billion. The stock has since increased to US$11.2 billion as at end December 2019.

This was on account of new disbursements on existing loans mostly earmarked for infrastructure development,” Dr. Ngandu said.

The Finance Minister said the stock of Government securities at end-2019 was K80.2 billion from K60.3 billion at end-June 2019.

“The increase is explained by the issuance of Government securities to finance the budget deficit for 2019,” he said.

On domestic arrests, Mr Ngandu said the stock of domestic arrears, excluding VAT, amounted to K26.2 billion at end-September 2019 from K20.2 billion at end June 2019.

“In my address in July 2019, I indicated that the Ministry of Finance would engage different Government ministries in order to agree on projects to be slowed down, re-scoped, canceled or postponed. We proceeded to undertake this process.

The outcome of these consultations was a Cabinet memorandum which Cabinet considered on 20th December, 2019.”

At its meeting, Cabinet directed that the following measures be undertaken:

a) A moratorium on contraction of external project loans;
b) Cancellation of selected external project loans;
c) Re-scoping of selected externally financed projects in order to reduce the project cost, and ultimately reduce the undisbursed loan balance.”

He said the moratorium on contraction of external project loans will apply mainly on non-concessional financing.

Dr Ngandu added that regarding the cancellation of selected external project loans, the external debt portfolio was extensively reviewed and relevant stakeholders engaged to identify and assess already contracted project loans.

He said these were then subjected to a defined criterion in order to determine their suitability for cancellation or re-scoping.

“The Government is currently reviewing the legal ramifications of undertaking the debt re-profiling exercise and will subsequently engage with lenders and contractors.”

The Finance Minister said the reduction in the undisbursed debt by cancellation and re-scoping of selected project loans, coupled with the moratorium on project loan contraction, will contain the rise in the debt stock and position the country on a sustainable path.

He said the measures are aimed at reducing the current undisbursed external debt of approximately US $7 billion by about US $5 billion.

“The re-scoping exercise in the road sector will reduce project costs from K10 billion to K1.4 billion.

“To unlock liquidity to the private sector, Government is working towards reducing the stock of arrears to domestic suppliers of goods and services.

Between December 2019 and January 2020, the Ministry released a total of K590 million to the National Road Fund Agency and paid out K452 million representing 77 percent of the amount owed to local road contractors and consultants,” he said.

He said almost all the contractors undertaking routine maintenance works were paid in full.

“In order to avoid further accumulation of arrears, Government has, as part of its austerity measures, enhanced its commitment control systems.”

He added, “All erring controlling officers will be held to account in line with the Public Finance Management Act.”