Zambia’s Hidden Debt Crisis.

Dr Nevers Sekwila Mumba writes:
On 21st June 2017, Finance Minister Felix Mutati gave a ministerial statement in Parliament in which he said that Zambia’s foreign debt stock stood at US$17.2bn. After much debate and discussion, he clarified later on that he had misspoken and that the correct figure was actually US$7.2bn. This figure was challenged, most notably by Trevor Simumba, a Zambian financial analyst.
Considering that there is much confusion among Zambians on what the correct debt position is, we did our own research and concluded that the figure of $7.2bn Mr Mutati gave is simply not true. Based on evidence gathered from a variety of sources, we have found that the true figure appears to be at least 4 times larger than stated. Our preliminary figures, based on information in the public domain, show that at a minimum, the true debt position is about $33 billion!!!
In 2011 when the Patriotic Front (PF) government took office, Zambia’s external debt stood at $3.5 billion (15% of GDP). Using the government’s own figures, it has ballooned to $7.2 billion (34% of an estimated $21 billion GDP) in 2017 and the year is not yet over. But the World Bank as of 2015 put the debt at $8.7 billion (by 2017 it is certainly around $10 billion). Using our computed figure of $33 billion, it is 157% of GDP. 40% is the government’s own acceptable threshold.
The list below, which is certainly not exhaustive, does not count other loans for 2017 still in negotiations such as the Lusaka-Ndola dual carriageway which will cost not less than $500 million and it does not factor in local debt ($4 billion) or arrears owed to contractors ($1.7 billion). We have also not factored in an estimate of unknown loans. We estimate that the grand total of all debts is anything from $35 billion to $40 billion.
To make our research more complete, we have also taken into account debt servicing. Below the list of loans is the list of debt servicing per year from 2011 to 2015 based on data from the World Bank. We have added our own estimate for debt servicing for 2016 and 2017. Also of note is the fact that the government has this year requested for an additional $8 billion from China to fund infrastructure development. This shall make the debt position far worse than anything imaginable for Zambia.
What is clear from all the information available is that Zambia is sitting on a massive debt time bomb that shall explode in a very big way within the next 5 to 10 years. Based on projections of current economic growth rates, Zambia will not manage to pay off those debts in a sustainable way. A sovereign debt default and significant credit rating downgrade is a very real possibility.
We do not claim perfection in our research and there is a chance that there could be gaps in our information. We therefore call upon Mr Mutati to issue another ministerial statement and shed light on this matter with the true debt position because it appears the Zambian government is being economical with the truth. Zambians need to know the real debt position so that they can anticipate what is coming ahead of us economically.
The IMF is already in negotiations with the government for a $1.6bn bailout and they also need to know the truth, the whole truth and nothing but the truth in order to determine how much they can lend because they need to know our capacity to repay.
LIST OF MAJOR LOANS (2011 – 2017)
1. Kenneth Kaunda International Airport: $360 million (2014)
2. Poverty reduction projects: $13.5 Billion (2012)
3. Poverty reduction programmes: $6.7 billion (2011)
4. 750MW Kafue Gorge Lower Power Plant: $1.7 billion (2015)
5. 360MW Kariba North Bank Power Plant Expansion: $430 million (2014)
6. Lusaka L400 roads: $300 million (2013)
7. Copperbelt International Airport (Ndola): $400 million (2017)
8. Lusaka de-congestion: $286 million (2017)
9. Communication towers: $280 million (2017)
10. Copperbelt C400 roads: $418 million (2015)
11. Chipata-Serenje railway line: $2.3 billion (2017)
12. Mongu-Kalabo Road: $287 million (2011)
13. 2,000 Military Houses: $157 million (2017)
14. Mansa-Luwingu road: $242 million (2012)
15. Water and sanitation programme: $135 million (2016)
16. Mbala-Nakonde Road: $180 million (2011)
17. Lusaka sanitation project: $130 million (2015)
18. Kafubu water and sanitation project: $104 million (2014)
19. National Heroes Stadium: $94 million (2011)
20. Levy Mwanawasa Hospital Expansion: $90 million (2015)
21. Kafulafuta Dam water project: $449 million (2017)
22. Housing project for security wings: $275 million (2015)
23. International Development Assistance programme: $600 million (2017)
24. Rural roads project (World Bank): $200 million (2017)
25. Environmental Remediation and Agribusiness Development: $106 million (2016)
26. Miscellaneous small loans: $300 million (estimate)
27. Debt position of previous government up to 2011: $3.5 billion
TOTAL: $33.5 billion
ANNUAL EXTERNAL DEBT SERVICING
2011: $229.6 million
2012: $230.1 million
2013: $325.9 million
2014: $396.0 million
2015: $507.3 million
2016: $660.0 million (estimate)
2017: $800.0 million (estimate)
TOTAL: $3.1 billion
ESTIMATED NET DEBT: $30.4 billion (2017)
SOURCES:
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