Ahead of a crucial judicial decision on his eligibility for a third term, Zambia’s president seeks to placate the opposition to sway concerned donors, while co-opting some of his detractors in a bid to split resistance to his power extension bid.
The finance ministry has announced a raft of measures to curb fiscal imprudence and to halt further borrowing, yet it still does not acknowledge Zambia’s total external debt and remains unwilling to specify how much debt it intends to dishonour.
Zambia’s finance minister is desperately seeking a new IMF mission to kick-start bailout negotiations ahead of its next Eurobond tranche payment, yet continued borrowing and debt miscalculations are diminishing such prospects.
As foreign currency debt issuance reaches a new record so far this year, there are growing concerns over debt servicing sustainability, while several African economies are at serious risk of debt distress.
The government is tentatively disclosing details on previously undisclosed debt to the IMF, which should advance eventual bailout negotiations, yet the economic outlook is fast deteriorating and further straining the budget deficit.
Investor panic over Zambia’s debt situation is pushing the government towards an urgent agreement with the IMF, while political momentum is shifting against President Lungu who is being blamed for the crisis.
Over the past week, concern over Zambia’s undisclosed debts and economic mismanagement has at last been publicly noted. Given the broad interest in the unfolding debt situation and various parallel political developments, we summarise the key issues currently determining Zambia’s risk outlook.
Rising copper prices will not be adequate to prevent a serious debt crisis in Zambia as long as the government continues to sign new loans, while risk of contagion to the private sector is rising fast.
The postponement of an impeachment motion is likely to trigger fresh unrest and acts of defiance by opposition supporters, even though growing numbers of ruling party lawmakers now support the president’s removal.
The government targets the copper mining sector with massive fines and taxes as a negotiating tactic to quickly extract further funds from mining companies to fund its cash-strapped and heavily indebted Treasury.
- EXX Africa director Robert Besseling moderated a panel on Africa’s commodity rollercoaster at GTR Commodities in Geneva hosted by Global Trade Review (GTR)
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