African appeals for Chinese debt relief have until recently been somewhat vague and indirect, at least publicly. Well, that changed when the spokesman for Edgar Lungu released details of Zambian president’s call on Monday with his Chinese counterpart Xi Jinping.
“President Lungu called for debt relief and cancellation in light of reduced revenue due to the negative impact of the pandemic, as well as competing needs for the country, to secure adequate resources to fight the pandemic and to stimulate the economy,” said a statement released by presidential spokesman Isaac Chipampe.
Even though the price of copper, Zambia’s primary export revenue generator, is nearing two-year highs, the country is buckling under the weight of more than $10 billion of debt. It has $3 billion in Eurobonds outstanding and owes $2 billion to commercial banks, $2 billion to the IMF and World Bank, and a further $3 billion to China, according to Reuters.
Neither the Chinese embassy in Lusaka nor the foreign ministry in Beijing have publicly responded to President Lungu’s appeal.
How Did Zambia Get Into Such a Financial Mess?
- BORROWED TOO MUCH: President Edgar Lungu’s ruling Patriotic Front party “borrowed heavily, splurging on infrastructure and civil-service pay. In 2015, when Mr. Lungu became president, these trends accelerated. Debt in foreign currencies or owed to foreigners tripled between 2014 and 2018 relative to GDP.” (THE ECONOMIST)
- WEAK GOVERNANCE: “Zambia is growing its debts without yet seeing enough benefits from its investments. First, there was hardly any systematic priority for which roads were most needed. Second, the contracts were in many cases awarded without proper tendering, partly because of tied funding from Chinese banks. Third, the cost of construction was often very high compared to neighboring countries. There is strong suspicion that decision-makers in or close to the President’s office benefited from such contracts.” (ARVE OFSTAD & ELLING TJØNNELAND)
- CNBC.com: Zambia’s spiraling debt offers glimpse into the future of Chinese loan financing in Africa by Eliot Smith
- The Chr. Michelsen Institute: Zambia’s looming debt crisis – is China to blame? by Arve Ofstad and Elling Tjønneland
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