THE IMPLICATIONS OF ZAMBIA’S DEBT RESTRUCTURING PROCESS
IN as much as debt has been the main precursor in relation to the IMF bailout package, it is also a tough puzzle to work around with, especially with the questions surrounding debt restructuring plans mainly due to the complicity with a portfolio of national debts, which comprises of debts from capital market, bilateral parties and multilateral players altogether combined.
Zambia went on, to issue three key debt instruments (Eurobonds) in 2012, 2014 and 2015 which are estimated to have a stock value of slightly above $3 billion worth of international market debt without the other external funding counting them too, though my peculiar interest is narrowed down on the Eurobonds.
The current challenging part today is the repayment of a first and 2012 Eurobond in this month of September, thus amounting to $750 million, of which from the look of things is unlikely going to be paid up due to many factors sitting on the table especially that Zambia doesn’t seem to have prepared enough life-saving models for this particular payment package.
So, the consolation is that we need to restructure all debt portfolios to comparable terms so that repayments can be guaranteed to all parties regardless of debt nature, otherwise at this point in time no one creditor is superior to the other.
Though the challenge with Eurobond is that there are so many stakeholders that are involved into it and that make it a little bit difficult to re-arrange or restructure but hopefully we will pass this stage at a higher cost I guess.
The many other biggest challenge as well is also coming from a number of defaults that Zambia has done so far, and it is however gratifying to state that Zambia should also make a formal request of extension right before anything goes deeper with the IMF to negotiate on a 20-year repayment scheme on its recent announced package rather than making it in 15 years with 10 years repayments and five years grace period.
This extension can also help put key economic fundamentals in place, and will help out to push growth in the economy.
And we should make sure at all possible costs that we strongly push to work around these recently approved parliamentary financing benchmarks without going beyond 65 percent of total GDP in both future loans and guarantees.
It will be ideal for Zambia to push creditor’s committee meetings faster so that debt restructuring framework starts anchoring good expectations in the economy, otherwise this will spoil the good marks recorded so far, especially if we delay any further at this point, though we were expecting the IMF bailout package to have come out way after this process of debt restructuring.