The Kitwe Chamber of Commerce (KCC) has welcomed the debt restructuring agreement between the Zambian government and its external creditors of the country’s Eurobonds, and hailed the move as a boom for local business and industry in the country.
KCC president Emmanuel Mbambiko, said in an interview that the agreement to restructure the country’s $3.5 billion foreign private debt with international creditors had brought renewed hope for local industry to start engaging in sound economic activity and support the government’s development agenda.
“It was critical for Zambia to get this relief. It brings us plenty of hope for business because the journey to recovery must now commence and the investments into the social sector must begin.”
Mbambiko said businesses anticipate the local economy would be spurred by resources the government is expected to save from debt servicing and funnel towards social sector spending in areas that would generate economic activity. He said this would have a positive ripple effect on total economic output.
“Sooner rather than later the government must begin to look into construction of roads, health facilities and schools and investment into irrigation projects and alternative energy sources. We hope that the business sector will be there as captains of industry to participate and support the government’s development agenda.”
Mbambiko said the closing of the agreement to restructure the private debt between the government and foreign commercial creditors was long coming and its finalization would see an upswing in renewed investor confidence and improved credit ratings on the international market.
“Before this deal, we were threatened as a nation. Now, the going concern is no longer a factor, the risk factor for Zambia is going to be much lower in comparison to the risk factors we’ve carried all along,” he explained.
Mbambiko said businesses are expecting a significant reduction in the cost of business and stability of the local Kwacha against convertible foreign currencies. “It must strengthen,there is no reason why it cannot strengthen because there will be less speculation. For now, it is time to put on positivity and put off negativity.”
Under the new settlement, Zambia will not be required to pay back the three bonds debt until 2035 with reduced interest rates. The bond holders will forgo $840 million in claims and Zambia will receive a direct cash flow relief of $2.5 billion.
Two of the bonds were due for repayment in 2022 and 2024 respectively. However, Zambia defaulted moving the beleaguered economy closer to the brink of collapse. The country will now restructure and amortize the three bonds into two bonds, and has promised higher returns on one of them if the country’s economy makes significant gains.
“This restructuring will give us more breathing space. It will be a more comfortable repayment. The arrears we’ve been running have more or less been written off,” disclosed minister of Finance and National Planning Situmbeko Musokotwane in an interview.
Zambia has a crippling local and external debt stock which has denied the country fiscal space for growth, poverty reduction and provision of vital social services. Since the United Party for National Development under President Hakainde Hichilema took over government in 2021, the country commenced a vigorous IMF and World Bank supported economic reform program which saw tightening of government spending and removal of subsidies on essential commodities such as energy.
The country is reorganising its $14.48 billion external debt under the G20’s Common Framework established to assist low-income countries struggling with debt distress.
By John Mulenga
Kalemba March 27, 2024
