Thu, 06 Apr 2017 10:09:50 +0000
BY MAILESI BANDA
ZAMBIA is most likely to default on the first US $750 million Eurobond payment when maturity date falls in the next five years, former Bank of Zambia governor Caleb Fundanga has said.
The former Bank of Zambia governor said the country would not be in a position to redeem the first Eurobond when it falls due in 2022.
Speaking during a presentation at the Economic Association of Zambia public hearing on public debt trends in Zambia last Friday, he said the whole borrowed amount would have to be returned to the lenders in five years plus interest payments due, adding that the current economy could not support this.
“Recent debt sustainability analyses conducted by the IMF and World Bank indicates that Zambia has a high risk of external debt distress emanating from the Eurobonds maturing in between 2022 and 2027,” he said.
He said US $750 million would mature in 2022 and that the country was not financially able to pay this money back.
He explained that the main risk to external debt sustainability was associated with external debt distress which was heightened by the fact that economic performance would remain subdued over the medium term.
He said liquidity indicators showed significant fiscal pressure between 2022 and 2027 due to the maturing Eurobonds.
“The ratio of external debt service to revenue is expected to increase and breach the sustainable threshold of 20 percent between 2022 and 2027 from nine percent on average between 2015 and 2021, and obviously this will be a big burden,” he said.
He said the economy would remain depressed for a period of time and this would lead to failure to raise the millions needed to retire the bonds.
He wondered on which projects the money from the bonds was used, adding that there was need to address corruption in the use of public resources.
“Corruption needs to be addressed. What did we do with the money from the Eurobonds? Indeed, it’s true that some roads were built with some of that money but the truth is that we could have gotten more,” he said.
