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Faith, Civil Leaders in Zambia Want Lenders to “agree to a large-scale debt cancellation”

Zambia flag. Credit: Courtesy Photo

Officials of the Civil Society Organization (CSO) Debt Alliance in Zambia are calling on those who have loaned the Southern African nation money, whether private or other governments, to consider cancelling the loans in what they term “a large-scale debt cancellation”.

Zambia’s total public debt to local and foreign lenders stood at $27 billion at the end of June 2021, the Zambian government announced last October.

Last month, CSO Debt Alliance officials who include members of the Jesuit Centre for Theological Reflection (JCTR) and Caritas Zambia lauded the government of Zambia for what they described as “notable positives” in recovering the Southern African nation’s ailing economy. In their January 24 statement, the officials however said they were concerned about the extent of Zambia’s debt portfolio and its debt service levels.

In a Friday, February 4 statement, officials of the CSO Debt Alliance say loans from private entities and other governments have plunged Zambia into a “debt crisis” and argue that debt cancellation will benefit Zambians.

“As the Zambian Civil Society Debt Alliance, we are of the view that both lenders and the previous Zambian government are responsible for plunging Zambia into the current debt crisis. Private lenders and other governments lent to Zambia at high interest rates and high risk,” CSO Debt Alliance officials say.

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In their considered view, “lenders need to accept they lent recklessly and agree to a large-scale debt cancellation to allow the people of Zambia to tackle multiple external crises.”

In the statement signed by the group's chairperson, Fr. Alex Muyebe, the faith and civil leaders say the high-interest loans “should never have been made available in the first place.”

CSO Debt Alliance officials say they conducted an economic survey with the Jubilee Debt Campaign UK, whose leadership agrees that the debt needs to be canceled. 

Making reference to Jubilee Debt Campaign UK Executive Director, Heidi Chow, they say, "for the past three years, Zambia's debt has been bought and sold at 30 to 70% below face value." 

"Without large-scale debt cancellation, the wealthy owners of this debt stand to profit handsomely from the Zambian people,” Mr. Chow has been quoted as saying in the February 4 statement. 

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The Jubilee Debt official adds, "If private lenders refuse to agree to the necessary debt cancellation, the IMF and governments should support Zambia's decision to remain in default on them politically and financially."

In the February 4 statement, CSO Debt Alliance officials indicate that Zambia defaulted on interest payments to foreign currency bondholders in November 2020.

In February 2021, the Zambian government applied for debt restructuring through the G20 Common Framework, which allows G20 countries to cancel debts or reduce them to sustainable levels. 

The reduction or cancelation of dues is only possible if private lenders agree to at least the same amount of debt cancelation.

According to the CSO Debt Alliance officials, Zambia owes 46 percent of its external debt to private lenders, 22 percent to China, 8 percent to other governments, and 18 percent to multilateral institutions.

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They further say that debts to multilateral institutions are not included in the debt restructuring under the Common Framework.

Further, the faith and civil society leaders say Zambia has accrued interest rates averaging 6.1 percent to external private lenders, 3.1 percent to China, 4.8 to other governments, and 1percent to multilateral institutions. 

The CSO Debt Alliance officials say, "Approximately two-thirds of the external debt owed to private lenders and other governments, as well as all interest payments, must be cancelled, if sustainability is to be achieved." 

They call on the Zambian government to speed up the process of engaging creditors "so that a committee of lenders can be formed and provide financing assurances so that the process can move forward to the IMF's Executive Board." 

The CSO Debt Alliance officials further urge the government to conclude its agreement with the IMF and make progress "towards securing an arrangement for a treatment under the G20 common framework." 

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Beyond engaging the IMF, The CSO Debt Alliance officials ask the Zambian government to "develop a more aggressive plan to stimulate a private sector-led economic growth." 

"Within the framework of the expected debt management strategy, the Government should maintain a healthy Zambia/China relationship as the Chinese remain strategic partners with whom we hold a huge debt stock," they say. 

In addressing Zambia’s debt management issues, the faith and civil leaders ask the government to adopt a consultative and participatory approach by including key stakeholders such as CSOs. 

Debt management "should not be a preserve of the government and creditors only," the CSO Debt Alliance officials say, adding that it is important for Zambia "to clean its house." 

"This is especially with regards to the debt legislative framework, institutional strengthening and systems that will ensure that the nation does not return to unsustainable debt levels," they say in their February 4 statement.