Zambia takes stock in bid to lure back IMF

Zambia is shelving projects unless they are almost complete and will renegotiate loans as it seeks to contain ballooning debt and entice the IMF to restart talks on a support package.

The IMF has warned Zambia that it is at high risk of debt distress, while investors are sceptical about the amount of external loans the country claims it has incurred, saying it may be significantly more than the $9.3bn announced.

Zambian eurobonds have been the worst performers in 2018. The country has about $3bn in eurobonds outstanding, with the first of $750m due for repayment in 2022.

“We did a three-week deep dive into our debt sustainability assessment. We know what debt we have and we have shared the facts and figures with the IMF,” Zambian Finance Minister Margaret Mwanakatwe said in an interview. “We … have given them everything that they require with the possibility of re-engaging.”

Zambia approached the IMF in 2014 after a plunge in copper prices hit economic growth and curbed income from mining, a major source of revenue. The government is now seeking to roll back large-scale infrastructure projects and debt that it continued to accrue.

Mwanakatwe said that while the assessment would not be released to the public, it has given the government confidence in its debt numbers. It is hoped that this will be enough to appease the IMF and that it can be considered at the Washington-based lender’s September board meetings, she said.

“I need the IMF. I need the IMF because they bring confidence to my private sector here, to my external investors,” Mwanakatwe said.

The government is battling to convince investors it can control its debt. While the IMF welcomed a plan released in June to postpone taking on new liabilities and cancel some loans that have not been disbursed, yields on eurobonds due in July 2027 remain near 11%, having climbed almost 400 basis points in 2018.

The government should consider releasing the debt assessment to the public to show how confident it is in its numbers, says Trevor Simumba, an independent business consultant.

Zambia’s expectations for IMF talks may be overly optimistic, he said. “For me, I think it’s a pipe dream right now. There are a lot of hoops that the government has to go through in order to re-engage.”

Mwanakatwe said the Zambian government would not do anything that puts at risk an economic recovery and will keep projects that boost expansion and offer social benefits.

Higher copper prices have helped support the economy, with growth rebounding to 4.1% in 2017, according to a government report.

Copper accounts for more than 70% of exports.

Mwanakatwe said the pace of debt accumulation will reduce significantly in future and talks with Chinese investors to restructure the terms of loans are proceeding “quite well”.