Zambia may seek talks with creditors to extend its debt repayments after reaching a preliminary deal with the International Monetary Fund (IMF) for a 1.4-billion-dollar facility, Finance Minister Situmbeko Musokotwane said on Tuesday.
Zambia, one of the world’s largest copper producers, became Africa’s first COVID-era sovereign defaulter in November 2020 after years of chronic government overborrowing drove its debt burden above 120 per cent of annual economic output.
Musokotwane also said in a speech delivered in parliament that Zambia’s current tax revenues were not enough to pay for government salaries and service debt.
“The heavy debt burden that Zambia carries is at the core of some of the serious socio-economic problems witnessed in Zambia in the last few years,” Musokotwane said.
The depreciation of the kwacha currency, rise in inflation to double-digits, and closure of some businesses were all consequences of excessive borrowing, he said.
Zambia has more than 14 billion dollars of external debt, including guaranteed loans to state-owned enterprises.
Of that, three billion dollars is Eurobonds, around 6 billion dollars is owed to Chinese entities and the remaining five billion dollars is a mix of commercial, multilateral, and bilateral borrowing.
The IMF and Zambia on Friday reached a staff-level agreement on a 1.4 billion dollars, three-year extended credit facility, bringing the country one step closer to a comprehensive debt overhaul.