By Alexander Nkosi
China has offered to co-chair Zambia’s debt restructuring, a very positive move given the huge amount Zambia owes China.
Once our debt is restructured, it will unlock a lot of benefits that include:
1. Reduce the amount we spend on debt service. In 2022 budget, USD3 billion (K51 billion) has been allocated to external debt service. This is paid in dollars and puts so much pressure on the kwacha, leading to a weak and unstable kwacha. Hence this move will help strengthen and stabilise the kwacha. This will enable Zambians import fuel, fertiliser, agriculture chemicals, machinery and other inputs in production needed for small scale mining, agriculture production, food processing and manufacturing in general.
2. Debt restructuring will also free up resources for both economic and social sector spending without having to heavily rely on borrowing. Zambia will be able to provide empowerment funds to support small scale mining, increased participation of locals in tourism, local processing of food, expansion of irrigation, agriculture extension and other important things.
3. Debt restructuring will reduce pressure on government domestic borrowing. One of the reasons interest rates are high is because government borrows heavily on the domestic market. Reduced domestic borrowing will push interest rates down and enable the private sector to borrow and expand their entreprises. This move will grow the economy, create jobs and expand tax revenue for government.
4. Once our debt is restructured, we will get IMF board approval and receive USD1.4 billion concessional loan. We will further receive USD564 million from World and have access to more concessional borrowing. Concessional loans come with low interest rates and long span of repayment. This will ensure we have access to money required to support Zambians expand production without carrying a huge debt burden that comes with commercial loans.
5. Debt restructuring and IMF deal will attract investments. In the past few years FDI had fallen by 50%. Increased FDI with strict and good policies that promote joint ventures is key to economic recovery. Having more dollars in the economy will help increase output, exports and forex which will further strengthen the kwacha. It will also create more jobs as the economy expands.
If still cannot see how Zambia’s economy is being fixed, I’m free for a one-on-one chat. Let’s work together to rebuild our economy.