Zambia says it owed more than $6 bln to Chinese creditors in June

PUBLISHED: Fri, 08 Oct 2021 11:23:56 GMT
Chris Mfula
Reuters
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Key Points
  • Government discloses new Chinese debt figure
  • Under heightened scrutiny after CARI study
  • $6.18 bln total is over 40% of external debt
Zambian presidential candidate for the opposition party United Party for National Development (UPND) Hakainde Hichilema gives a press conference at his residence, in Lusaka on August 11, 2021. – The UPND, the main rival to the ruling Patriotic Front (PF), is eager to tap into mounting disillusionment in the city’s poorest neighbourhoods, where dissent has grown since the last 2016 poll. (Photo by Patrick Meinhardt / AFP) (Photo by PATRICK MEINHARDT/AFP via Getty Images)

LUSAKA, Oct 7 (Reuters) – Zambia’s government and state-owned companies owed more than $6 billion to Chinese creditors at the end of June, new debt figures published by the government on Thursday showed.

The copper-rich southern African country has been under pressure to publish updated debt numbers since a study released last month by the China Africa Research Initiative (CARI) said Zambia’s debt to Chinese lenders was $6.6 billion, around double the amount disclosed by the previous administration.

At the time of the CARI report the new government elected in August responded by saying its debt numbers were “broadly consistent” with the research group’s estimate.

In November last year Zambia became the first country on the African continent to default on its sovereign debt during the COVID-19 pandemic. It is in talks with the International Monetary Fund to try to secure a lending programme as a precursor to a debt restructuring.

According to a breakdown by the finance ministry on Thursday, Zambia’s central government owed $4.47 billion to Chinese creditors at the end of June, state companies owed $1.34 billion via facilities guaranteed by the government and state power utility Zesco owed a further $0.14 billion not guaranteed by the government.

An additional $225.5 million of interest arrears means total public sector exposure to Chinese creditors was $6.18 billion at the end of the second quarter, the ministry said in a statement.

Read more: Zambia, IMF make progress towards bail-out loan programme

Earlier on Thursday, Vice President Mutale Nalumango said in parliament that Zambia owed Chinese creditors $5.75 billion, but the finance ministry statement made clear that figure was only debt arranged by Chinese institutions.

Some Chinese entities had participated in facilities arranged by other creditors, the ministry clarified.

The $6.18 billion total exposure to Chinese creditors represents more than 40% of Zambia’s total publicly guaranteed and non-guaranteed external debt, which the government put at $14.67 billion at the end of June.

Nalumango said Zambia would restructure its debt in a transparent fashion, without favouritism. As well as Chinese entities, Zambia’s external creditors include Eurobond holders, who are owed $3 billion, as well as multilateral lending agencies and foreign governments.

The vice president said the debt stock would be periodically audited and that one such audit was under way.

Asked whether the previous government had understated the debt, Finance Minister Situmbeko Musokotwane said loans amounting to $4.4 billion had been signed but not yet disbursed.

He said President Hakainde Hichilema’s administration was in discussions to try to cancel some of the undisbursed loans, without specifying with whom they were contracted.

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