Zambia’s external debt balloons to $11.2bn

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Zambia’s Finance Minister Dr Bwalya Ng’andu, has revealed that the Southern African state’s external debt now stands at $11.2bn an increase of $1bn from the end of July 2019.

Ng’andu who was speaking in Lusaka during a press briefing on the performance of that country’s economy, said when the nation was last updated in July 2019, the stock of external debt at end of June 2019 was US$10.23bn. “The stock has since increased to $11.2bn at the end of December 2019. This was on account of new disbursements on existing loans mostly earmarked for infrastructure development,” Ng’andu said.

The finance minister said the stock of government securities at the end of last year was K80.2bn ($5.4bn) from K60.3bn ($4bn) at the end of June 2019. “The increase is explained by the issuance of Government securities to finance the budget deficit for 2019,” he added.

On the domestic front, Ngandu explained that the stock of domestic arrears, excluding VAT, amounted to K26.2bn ($1.7bn) in September 2019 from K20.2bn ($1.3bn) in 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, cancelled or postponed. We proceeded to undertake this process. The outcome of these consultations was a Cabinet memorandum which Cabinet considered on 20th December, 2019,” he said.

Ng’andu pointed out thatt at the meeting, Cabinet directed that the following measures be undertaken: A moratorium on contraction of external project loans, cancellation of selected external project loans and re-scoping of selected externally financed projects in order to reduce the project cost, and ultimately reduce the undisbursed loan balance. “The moratorium on contraction of external project loans will apply mainly on non-concessional financing,” noted.

Ngandu said 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 minister said he is upbeat that 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. “The measures are aimed at reducing the current undisbursed external debt of approximately US $7bn by about $5bn.

“The re-scoping exercise in the road sector will reduce project costs from K10bn ($680m) to K1.4bn ($95m).

He reiterated that: “To unlock liquidity to the private sector, the 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 K590m ($40m) to the National Road Fund Agency and paid out K452m ($30.7m) representing 77% of the amount owed to local road contractors and consultants,” he said. “All contractors undertaking routine maintenance works have been paid in full.”

Ng’andu added that in order to avoid further accumulation of arrears, government has, as part of its austerity measures, enhanced its commitment control systems and all erring controlling officers will be held to account in line with the Public Finance Management Act.

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