By MUBANGA LUCHEMBE
TIME is running out if the UPND government is to restore public trust in debt-restructuring, Zambia’s perceptive observers have warned. With weeks after Zambia’s official creditors committee meeting took place last month, disappointingly, no Memorandum of Understanding (MoU) was signed.
Furthermore, it was Zambia’s fifth debt-relief failed-attempt, whilst adverse socio-economic factors keep on piling up, and debt-restructuring process doesn’t seem to have any end in sight.
In his assessment, Finance and National Planning Minister Situmbeko Musokotwane hopelessly appeared concerned after seeing the month of May pass without a debt-relief deal. Not only that, Zambia’s team of negotiators have also long-appeared to have failed to convince sceptical citizens that the UPND government was prepared to pay enough attention to pursue the bilateral arbiter for the debt-relief deal, and one with a de facto veto – China.
Consequently, speaking at Community House when defence and security chiefs recently called on him to deliver goodwill messages on his 61st birthday, President Hakainde Hichilema proclaimed that working to achieve completion of debt-restructuring was top priority on the UPND government’s agenda, as he was making efforts to ensure debt-restructuring was completed for the country to develop.
Yet clearly, the Zambian negotiators’ approach has exhibited a misunderstanding of the basics of Chinese civilisation, culture and negotiating etiquette. Accordingly, this has resulted in China changing goal-posts and being reluctant to sign the debt-relief MoU on five different expected occasions.
Does this begin to sound familiar to President Hichilema, who won Zambia’s presidency after five failed-attempts?
Likewise, there are five different dates on which the debt-relief deal was expected to be consummated. And these dates are: December 31, 2022; during the G-20 Finance Ministers in February, 2023 in India; the end of 2023 first quarter – March 31, 2023; the April 2023’s IMF/World Bank Spring meetings in Washington DC and the latest being May 31, 2023 during the latest creditors committee meeting so that the country could have access to the next tranche of the IMF Credit Facility.
Most knowledgeable observers of Zambia’s socio-economic landscape are not holding their breath, as they are acutely aware that the period running up to the signing of the debt-relief MoU is a characteristic mix of the not-so-good, the downright ugly and, of course, the unpredictable.
The sympathetic hearing the UPND government currently gets from Western capitals is held against it by China, because their narrative had initially fuelled distrust and bodes ill for the world’s leading creditor.
So rather than risk unpredictable outcomes, the country’s preference to the resolution of the debt-relief deal at its current stage, lies more on what steps Zambia takes in directly engaging its biggest bilateral creditor, and not necessarily with appeals to the creditors committee, which is quite toothless without Chinese support.
Perceptive observers in Zambia have not minced their words. The UPND administration, they say, must be shocked and disappointed about how the debt-restructuring talks have turned out to be.
They did not anticipate that the talks would take this long culminating in the reversal of some of the macroeconomic gains they had initially scored. This, however, should be part of their learning curve.
They should not be tip-toeing around the stalled debt-relief deal. There are a number of lessons that they could draw from this experience. The wise learn from their own mistakes and those of others.
One of the first lessons from the stalled debt-relief deal is the exposure of the limitations of the US Treasury and Bretton Woods institutions like the IMF and World Bank’s influence in the 21st Century development finance ecosystem.
The West has failed to deliver debt-relief to Zambia without China. There is no doubt that Zambia over-relied on the West to deliver the deal, based on the country’s experience with the Highly Indebted Poor Countries programme of the early 2000s but the international financial system has since considerably evolved.
Another major lesson for the UPND administration is for them to open-up to advice from different sections of the Zambian society, because running a country is complex, with many uncontrollable variables and too many moving parts.
There is no one individual or group of individuals who can claim to be an omniscient negotiator or administrator, as correctly observed by experienced ex-mandarins and ex-diplomats of the previous UNIP, MMD and PF regimes.
Worth pointing out though, in April, 2022, Chinese Ambassador to Zambia Du Xiaohui explained why China didn’t want to join the G-20 creditors committee because it believed that friendly bilateral cooperation was the best way to deal with debt between all-weather friends.
It follows that China treats the creditors committee with some element of contempt, partly because it is a creation of the West. China is reluctantly participating in the creditors committee.
Undeniably, Beijing views the creditors committee as a formal administrative convenience for its borrowers to access IMF funding, among other things, but doesn’t take it as a serious negotiating forum for its debt, at least.
And Zambia would only get quicker results by direct bilateral engagement with China, and the creditors committee being there for rubber-stamping.
It is no secret that China is now the world’s leading creditor nation, while the US is the world’s largest debtor. Beijing is the largest foreign holder of US government debt – passing Japan in 2008 to become, in effect, the US government’s largest foreign creditor.
While some claim this gives Beijing unprecedented power over the US, others claim that China’s power is in fact greatly circumscribed.
To some extent, current patterns of economic interdependence between the two economies invariably pushes each towards cooperation, China is deeply concerned about the future trajectory of the US economy and is already engaged in loosening the bonds of interdependence.
This has profound implications for Sino-US relations and the global economy.
Ultimately, Beijing is no doubt deeply concerned about the American economy’s trajectory. They have every reason to be worried. If current trends continue, China’s huge dollar-denominated foreign reserves could lose significant value in coming years.
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