The Financial Times newspaper published a sharply worded editorial this weekend that called on Chinese creditors and Zambian borrowers to be more transparent in their dealings with one another in order to avoid what looks increasingly like an imminent default on some of the southern Africa’s country’s external debt:
The terms of Chinese loans are opaque and often tied to specific projects. Eurobond holders are reluctant to bail Zambia out. Not without reason they suspect Lusaka will use the money to pay back China. When probed, the Zambian government has talked about drawing down $700m from unnamed creditors — presumably Chinese — for unnamed, supposedly indispensable, projects.
One answer to this conundrum is more transparency. Chinese banks, whether state-run or quasi-commercial, should be more open about what they are lending and on what terms. Zambia’s government too needs to come clean about its borrowings and finances.
Zambia can help allay these fears by agreeing a long-talked-about IMF package. That would bring external scrutiny and comfort to lenders that it is serious about putting its finances in order.
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