When a country can no longer afford to meet its debt obligations, you know it is in dire financial straits. That is the position that Zambia, Africa’s number two copper producer, finds itself in. Zambia had wanted a grace period until April to begin its payments again, but bondholders drew a line in the sand.
Finance Minister Bwalya Ng’andu was quoted by Reuters as saying that the government was in talks with the International Monetary Fund . The Covid crisis has revealed a new side to the IMF, one that encouraged government spending and fiscal measures to boost economic activity in the face of the pandemic. It will be interesting to see what its ultimate prescription is for Zambia.“This is unlikely to be the case. Zambia’s increasing debt unsustainability has been evident for some time.
There have also been renewed calls for debt forgiveness in Africa. This is understandable, as the poor, as usual, will bear the brunt and pay the highest price for shoddy governance and economic mismanagement. But it may also make it harder for African nations to raise badly needed debt from sceptical investors. South Africa’s debt levels are also surging, but there is little talk at the moment about a Pretoria default. If that day comes, South Africans may have Eskom, SAA and the like to thank for it.
NicoletteErasms Who did you speak to in the government of Zambia that told you about this imminent default?