EuroBonds vs Brentwood Institutions (IMF and World Bank)

By
Yohane Mbeeya Moono

The August elections brought a serious debate on the state of the Zambian economy and the future of the country’s Economic Transformation and Development. The biggest issue has centred around which source of financing the capital projects in the country is better.
Looking at the conditions of the such financial Institutions and how best they work out still remains a big debate in many countries around the world.

For the International Monetary Fund (IMF) and World Bank have some of the following as their conditions to be granted a loan:
Their loans have interest rates ranging from 0-6% of the principal amount.
Their loans comes with a long term repayment period.
Critically they emphasize on
Serious Fiscal Discipline and the country living within it’s means
Accountability is the focus in the delivery of the projects being undertaken
Countries have to show cause why they deserve to be given the loan by these institutions
Mainly focuses on sustainable social and economic development of the country
Defending and promoting Human Rights in their statutory mandates
Promoting Good Governance and to combat corruption.
Promote the Rule of Law and protection of the constitution.

For the Eurobonds
A Eurobond is a fixed-income debt instrument (security) dominated in different currency than the local one of the country where the bond is being issued to.
Therefore these are capital market securities hence the higher interest rates and market volatility.
Since these are owned by corporations, they are also characterised by rising interest rates depending on the market stability.
They are also regarded as credit risks by markets experts because of their unpredictability.

Zambia has had an experience with both of these types of loans and the country has so far not fully satisfied herself to reach the kind of development standards she desires. The previous regime targeted the Eurobonds as the source of finance for the major capital projects the government embarked on and the current regime seems to favour the Brentwood Institutions to help it’s agenda of putting some capital projects around the country.

A serious paradigm shift is needed for the country to free herself from the shackles of poverty and underdevelopment that have highly plagued the country