Zambian President Edgar Lungu shakes hands with Chinese President Xi Jinping before their bilateral meeting at the Great Hall of the People in Beijing, China on September 1, 2018. Nicolas Asfouri, Pool via Reuters

The administration of former Zambian President Edgar Lungu may have underestimated the Chinese lending burden among its external creditors, according to a new report from a US-based research program.

Lusaka owed Chinese financiers $ 6.6 billion in August, nearly double the $ 3.4 billion the southern African nation previously revealed, according to the China Africa Research Initiative (CARI) report. School of Advanced International Studies at Johns Hopkins University.

This figure did not include unpaid domestic debts to Chinese entrepreneurs.

Lungu’s administration had released debt figures for three Chinese lenders – China Eximbank, China Development Bank and China National Aero-Technology Import & Export Corporation.

However, he did not provide enough details about the debts of his state-owned companies and gave no details on the composition of creditors for their debt, said Deborah Brautigam, professor of international political economy at Johns Hopkins and director. founder of CARI.

The report released Tuesday, titled “Zambia’s Chinese Debt in the Age of the Pandemic,” found that 18 major and minor Chinese financiers had made external loans to Zambia and its state-owned enterprises since 2000.

The revelations could embolden President Hakainde Hichilema, who warned last month that former administration officials did not disclose many debts to foreign lenders, including Chinese entities.

Hichilema, who won a landslide victory over Lungu in national elections last month, pledged to “uncover Zambia’s real debt burden”.

“We had known for a long time that there had been no full disclosure,” Hichilema told Bloomberg on Aug.31, a week after taking office.

“So now that we are there, we are starting to see that the debt numbers that we were officially talking about are not the complete numbers.”

Zambia, Africa’s second-largest copper producer, has become heavily dependent on Chinese capital, which has financed a series of large infrastructure projects across Africa.

Getting a clear picture of Zambia’s debts could help the International Monetary Fund provide a bailout, as debt restructuring with foreign lenders would be a prerequisite.

The study indicates that official sources, including the World Bank and Zambia’s Ministry of Finance, did not provide specific information on the outstanding debts owed by Lusaka to Chinese lenders.

For example, the Ministry of Finance reported that Kafue Gorge Lower Power Development Corporation, a special-purpose vehicle wholly owned by Zesco, Zambia’s largest electricity company, had $ 932 million in outstanding debt. the end of 2020.

“None of these outstanding debts appear to have been reported to the World Bank’s international debt statistics or disclosed by the Ministry of Finance in its annual economic reports,” the CARI report said.

Zambia’s finance ministry told Bloomberg that “debt to Chinese lenders has been transparently reported as part of aggregate debt figures” and that it is normal not to provide a breakdown of debts to individual lenders , due to confidentiality clauses.

“The total amount of debt owed to China and any other creditor has been disclosed by Zambia transparently and to the extent possible and in accordance with the usual debt reporting schedule,” the ministry said.

It comes at a time when Zambia is trying to convince the IMF to provide a bailout, after becoming the first African country to default on the debt repayment of some of its Eurobonds in the era of the pandemic. .

On why Zambia had not collated the Chinese figures, Brautigam, also a co-author of the report, said: “I imagine the Lungu administration was avoiding the negative publicity that would have come from a much larger figure. raised.”

She said relations with China were highly politicized in Zambia, where “politicians have been playing the ‘Chinese card’ in elections for over 15 years.”

During his campaign for the 2006 presidential election, the late Michael Sata warned against relinquishing sovereignty from Zambia. But when he was elected president five years later, he praised Beijing’s continued funding for infrastructure projects. Sata died in 2014, with Defense Minister Lungu taking over the presidency.

In 2018, Hichilema urged China to slow down funding for Lusaka’s expansionist spending, but was questioned by police after claiming the government had sold a state-owned logging company to Chinese interests, sparking protests that led the looting of certain Chinese companies.

The CARI study found that Chinese financiers’ loan commitments between 2000 and 2020 amounted to US $ 10.3 billion, of which 63% or US $ 6.47 billion pledged since 2015 – when Lungu became president after Sata’s death.

“We calculate that Zambia and its state-owned enterprises have repaid at least US $ 1.2 billion to Chinese lenders since 2000,” Brautigam said in a note on the CARI report.

Years of massive spending amid a difficult economic outlook have seen Lusaka borrow excessively to meet its budget obligations, pushing its total external and state guaranteed public debt to 14.3 billion. dollars.

Zambia’s problems date back more than a decade, when it first took on debt to finance projects that included power dams, airports and roads. In 2005, the country benefited from massive debt cancellations from international financial institutions, including the World Bank and the Paris Club, amounting to US $ 3.8 billion – as part of the Support Initiative. heavily indebted poor countries (HIPCs).

This created room for more debt even after Lusaka promised it would avoid further non-concessional loans.

CARI reported that soon after the completion of HIPC, Zambia and its state-owned enterprises entered into at least 77 different loan contracts with Chinese financiers, many at commercial rates. She also borrowed around $ 3 billion through Eurobonds.

CARI said under Lungu between 2015 and 2021, Zambia sharply increased Chinese public works borrowing as copper prices fell, while cracking down on public disclosure.

In September 2017, the IMF classified Zambia at “high risk” of debt distress. But, despite the risks, Zambia secured at least $ 1.34 billion in new Chinese financing in 2018, half of all new loans signed by the government that year.

Brautigam said most, if not all, of Chinese borrowing could count against the US $ 14.3 billion of total foreign debt, as reported by the Lungu administration, “but no one specified which part of this debt is owed to all Chinese creditors combined or noticed that 18 Chinese lenders have granted loans in Zambia ”.

“This means that the Lungu government has not been transparent about the significant weight of Chinese financiers among its many external creditors.”

She said Zambia’s debt situation could complicate its demand for debt relief from G20 countries under the “common framework”.

“Given the complicated situation with at least 18 Chinese lenders providing external loans to the Zambian government and its state-owned enterprises, reaching a consensus on burden-sharing in the common framework will likely prove exceptionally difficult,” wrote Brautigam.

The “common framework” will allow China and the G20 countries to coordinate their discussions on restructuring Zambia’s debt – the first time China will hold multilateral debt negotiations.

RELATED VIDEO

About The Author

Related Posts