Fears grow of Zambia hiding debt like Mozambique

International lenders and markets are growing increasingly concerned about “hidden debt” in Zambia, a situation similar to the one that plunged neighbouring Mozambique into a deep financial crisis. For several weeks financiers have demanded answers about the level of the country’s true external borrowing — but officials have rubbished any suggestion of concealed debts. Zambia, the second largest copper producer in sub-saharan Africa, insists that its debt pile stands at $8.7 billion — but there have been suggestions it could be double that.

The allegations have raised fears among Zambians and foreign investors for whom the memory of Mozambique’s hidden debt fiasco is still fresh in the mind.

In 2016, international donors froze fiscal support to Mozambique after it emerged that the country had taken $2 billion of “off-book” loans to finance maritime vessels and military equipment.

That move plunged the impoverished country into serious economic and financial crisis.

Maputo has since suspended repayments to creditors and is seeking to renegotiate its debt mountain.

Japanese finance giant Nomura recently questioned the size of Zambia’s public debt, suggesting the government is concealing a substantial amount of short-term external debt.

In a note last week, the director of the political risk advisory firm EXX Africa also warned of “mounting evidence of undisclosed loans” and said Zambia had miscalculated its total debt.

“Based on documentary evidence, we assess that external debt could be as high as $15.6 billion, while local debt seems almost incalculable given the opacity in lending to state-owned entities from local banks,” wrote Robert Besseling.

But Zambian authorities have brushed aside the growing concerns over the actual size of its external public debt, which has been putting pressure on the value of government bonds.

Former finance minister Felix Mutati last year told parliament that foreign debt stood at $17.2 billion — but retracted the figure days later saying he had misstated it and insisted that the debt burden was just $7.2 billion. But the damage had already been done. Chishimba Kambwili, a ruling party lawmaker and former minister, accused his own government of cooking the books.

“They have been hiding the figures,” he said, suggesting the debt could be as high as $23 billion.

Former vice president and now opposition politician Nevers Mumba is also convinced there is an official cover-up.