President Edgar Lungu is gearing up his strategy to remain in office, which will consist of centralising political authority, repressing his critics, and overspending on politically motivated infrastructure and defence sector projects.
While the risk of a default remains relatively low into 2019, lack of progress on fiscal consolidation and slow-paced negotiations with the IMF pose a real threat of a sudden shock to Zambia’s financial stability, which would trigger a non-payment on loan conditions.
New revelations concerning public embezzlement, political intervention in the judiciary, overspending on military procurement, and public asset collateralisation are expected to frustrate any hope of a breakthrough during renewed talks with the IMF and motivate further donor aid cuts.
Mounting concerns over Africa’s debt sustainability are frustrating key investment decisions and infrastructure financing. In this special report EXX Africa identifies the countries in best and worst position to attract further debt.
The government seeks to tap mining sector revenues in a demonstration to the IMF of its newfound commitment to fiscal consolidation; yet such measures are likely to stall expansion plans and lead to withdrawal of mining investments.
Following another calamitous month, Zambia’s government needs to urgently commit to deficit reduction through additional taxes and debt restructuring, or face the prospect of a default by early 2019. A Chinese asset-backed bailout is unlikely to be a sustainable solution to the deepening crisis.
Western donors are suspending budgetary support to Zambia’s government due to concerns over financial mismanagement, thus straining debt servicing ability and casting into doubt ongoing project finance deals.
Desperately searching for fresh funds to service its mounting debt burden, the cash-strapped government has stopped paying public salaries and repaying VAT rebates to mining firms, while offering state assets as collateral for new loans.
Despite its ballooning debt burden and widening fiscal deficit, Zambia expects to conclude a deal with the IMF on a credit facility in the four-month outlook, which would mitigate the probability of default in the short-term, but non-payment risks will remain heightened well into next year.
Falling copper prices are adding to Zambia’s economic woes, while the government is making fresh strides towards fiscal prudence and is floating austerity measures to rein in a mounting debt burden.
- EXX Africa director Robert Besseling moderated a panel on Africa’s commodity rollercoaster at GTR Commodities in Geneva hosted by Global Trade Review (GTR)
- SOUTH SUDAN: DEBT BURDEN AND CORRUPTION MAY DISSUADE FRESH FOREIGN INVESTMENT
- TUNISIA: MAIN POLITICAL PARTIES SEEK TO MITIGATE IMPACT OF UPSET ELECTORAL DEFEAT
- ZAMBIA: CHINA SEEKS MINING ASSETS AS COLLATERAL TO PROTECT AGAINST LOOMING DEFAULT
- SPECIAL REPORT: SHOCK TO GLOBAL OIL PRICES WILL IMPACT AFRICAN PRODUCERS AND IMPORTERS