Zambia Took On More Than $3 Billion in External Debt in 2016

LUSAKA (Capital Markets in Africa) – Zambia committed to $3.5 billion of new loans last year, 56 percent more than in 2015, the Finance Ministry said.

Of the $3.1 billion in loans the government of Africa’s second-biggest copper producer contracted in 2016, as opposed to just committing to, $1.8 billion came from Chinese lenders, the ministry said in its annual economic report for last year.

Despite the new loans, the government’s external debt position increased by just 3.7 percent to $6.95 billion, the ministry said in the report posted to its website Thursday. The newly contracted debt isn’t included in the total because the state has yet to receive the money, Ministry of Finance Permanent Secretary for Economic Management and Finance Mukuli Chikuba said in a text message.

The biggest loan, $449 million from Standard Chartered Bank, will fund a water project in the Copperbelt province. The Export-Import Bank of China agreed to lend the government $338 million for a new airport in Ndola, also in Copperbelt, as well as $313 million for urban road development in Lusaka, the capital. Zambia also contracted a $275 million loan from Industrial Commercial Bank of China for a housing project, it said.

The government struck 24 external-loan deals in 2016, twice the amount of the previous year, when more than half of the $2.2 billion contracted came from the sale of a $1.25 billion Eurobond. Zambia stayed away from the Eurobond market last year and won’t return this year, according to Finance Minister Felix Mutati.

External debt-servicing costs rose 57 percent last year to $484 million, the ministry said in the report. The country’s foreign debt has about doubled since 2013, when it totaled $3.5 billion.

Zambia’s domestic debt also increased by 88 percent in 2016, according to the report. Money owed to local-currency bondholders rose 57 percent to 19.8 billion kwacha ($202 million), including a 1.6 billion kwacha private placement to Citibank. Domestic arrears shot up by 572 percent to 18.8 billion kwacha.

The Citibank placement was made in December and “part of the domestic programmed financing for 2016,” Chikuba said.

The country is in talks with the International Monetary Fund over an economic program that may include a loan of as much as $1.6 billion, and Mutati hopes to reach a deal by July.