China’s role in Zambia’s debt restructuring

AS we indicated last week, Zambia urgently needs deep and comprehensive debt treatment in line with the Joint World Bank (WB)-International Monetary Fund (IMF) Debt Sustainability Analysis (DSA).
The debt analysis calls for $8.4 billion in debt relief in 2022-2025 and additional relief through 2031.
In last week’s column on whether Zambia is a victim of China-United States (US) showdown in debt restructuring deal, we focused on the role of both China and the US in resolving Zambia’s debt issue.
I noted that Zambia has, apparently, found itself in the middle of these international giants who are each seemingly pulling in different directions while the southern African country continues desiring debt relief through debt restructuring.
I further urged you to look out for the next article, this one, as we get views from economic experts on the matter.
As if in direct response to that article, Finance minister Situmbeko Musokotwane said on the same day it was published that the country’s protracted negotiations on debt restructuring are putting pressure on the strength of the dear Kwacha.
Dr Musokotwane notes that the prolonged process has caused some people who are supposed to buy government bonds to hold on to their money, further worsening the situation.
He said this during a virtual interaction with Zambians on the Ministry of Finance Facebook and Zoom accounts.
Sadly, the negotiations on debt restructuring have dragged on for months, with no conclusion in sight and Dr Musokotwane’s sentiments last week show that the delay has started having some direct effects on the local economy.
As indicated last week, the Zambian government seems to have done its part 100 per cent and other stakeholders are keen to see that the country’s debt efforts materialise.
More importantly but indirectly, Dr Musokotwane recognises China’s special role in this saying that Zambia has had engagements with its officials on various fora and discussions have been fruitful.
“We have had meetings with our Chinese colleagues almost weekly. They are asking questions of clarity on how they should engage and they are also keen to see this addressed,” he says.
Mentioning of China, Zambia requested a debt treatment under the G20’s Common Framework and launched fiscal and structural reforms to restore macroeconomic stability and reinvigorate growth.
Zambia is seeking a reduction in its debt burden from its external creditors, through the G-20 Common Framework for debt treatments.
China which is said to account for a substantial amount of Zambia’s debt stock co-chairs a committee of official bilateral creditors with France as part of a debt restructuring deal that Zambia is seeking under the Group of 20’s Common Framework.
In fact, other stakeholders interviewed by this paper were short of saying that China holds the key to the conclusion of the debt restructuring negotiations alongside the multilateral lenders like the IMF and the WB.
For instance, social economist Kelvin Chisanga advises that Zambia’s engagement of the Chinese government is the right way to go because that vast country has a big role in helping Zambia come out of its debt.
Other stakeholders say the issue should be resolved using bilateral means noting that the two countries enjoy cordial and warm ties which Zambia should leverage.
For instance, the Zambia Institute for Policy and Research (ZIPAR) is confident that Zambia’s debt restructuring process will be resolved through bilateral talks with China.
According to ZIPAR executive director Herrick Mpuku holding bilateral talks with China is the surest way of helping to resolve the issue and a big step towards the completion of the debt restructuring process.
The successful dialogue with China to bring it on board in the debt restructuring process is possible because of the long-standing relationship they two countries share.
Dr Mpuku says there is a lot of goodwill from China which has been an all-weather friend of Zambia and the Zambian government should tap into that to resolve the country’s debt crisis.
“Zambia should play the diplomatic card with China regarding the debt restructuring process and also engage other players in the process through dialogue because it is the only way to resolve this matter,” he told this paper.
Simultaneously, the Zambia Chamber of Commerce and Industry (ZACCI) has implored the WB to use its influence and ensure that Zambia completes its debt restructuring process.
ZACCI president Dr Chabuka Kawesha implores the WB to use its influence to help Zambia resolve the debt restructuring process as it will help put the private sector on a positive trajectory in terms of delivery.
Since the Zambian government has spoken, the local stakeholders have also done so and many others, we will now get the Chinese government for its views on the matter and the possible way forward.
Look out for that article next week!
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