Zambia’s Finance Minister Situmbeko Musokotwane has informed members of thirteenth session of Parliament that the Government’s external debt currently stands at US$12.91 billion at half year 2021.
“The stock of Central Government external debt as at end June 2021 stood at US $12.91 billion. But, as per convention, when we add $1.57 billion of debt by parastatals that government guaranteed to the creditors, the total government external debt as at end June 2021, stood at US $14.48 billion”, said the Minister of Finance in his statement on the state of the economy on 5th October 2021 at the National Assembly in Lusaka, Zambia.
Adding the $1.57 billion was a signal from the Minister to indicate the currently ‘being consolidated’ position on additional contractual obligations that GRZ had in relation to loans that were acquired by parastatals by issuing loan guarantees. “A loan guarantee is a contractual obligation between the government, private creditors (the parastatals) and a borrower—such as banks and other commercial loan institutions—that the Federal government will cover the borrower’s debt obligation in the event that the borrower defaults”.
Since taking office, the new administration has indicated that the newly appointed Finance Minister would provide a comprehensive statement regarding the true debt of the country. As a guiding principle, the first point of information collection is the Debt Management and Financial Analysis System (DMFAS) which is used to record all of the country’s external debt information. According to the Ministry of Finance’s Debt Statistical Bulletin, “the DMFAS is a specialised database management system tailored around debt management principles. Most of the aggregated external debt data presented in the statistical tables are produced from this database. Other data such as domestic debt are generated from the Central Securities Depository system (CSD)”.
How the Ministry of Finance Reports Country Debt
In the Debt Statistical Bulletin which is published quarterly (the last one was published for Q1 2021 and is available on the MoF website), the Ministry categorizes debt in a twofold manner: Public Sector Debt and Private Sector Debt. By definition, Public Sector debt represents debt that the Government is involved in acquiring (includes External ie. Eurobonds, Chinese loans, etc, and Internal i.e. T-bills, GRZ Bonds, etc) whereas Private Sector debt is that of private sector which is largely driven by the Commercial Banks and other Large Corporates.
In their Q1 2021 report, Public Sector Debt stood at $20.9 billion which comprised of $14.4 billion (External debt) and $6.51 billion (Domestic Debt).
External Country debt stood at $28.9 billion which comprised of the earlier mentioned $14.4 billion attributed to GRZ and $14.5 billion attributed to private sector.
Origins of Clarification on Debt Numbers
In his Ministerial Statement on Zambia’s Public Debt Management Strategy delivered to parliament, the then Minister of Finance Dr. Bwalya Ng’andu had reaffirmed that Zambias GRZ stock of external debt as at end of 2019 was $11.48 billion. The minister at the time issued this statement to clarify the debt position following a misinterpreted World Bank Report that many local economic pundits bundled the $15.57 billion private sector external debt together with the GRZ $11.48 billion.
Dr. Bwalya Ng’andu was on record at the time as engagements had already commenced that would create a clear roadmap for an IMF Program. Debt transparency is a condition any lender requires during the appraisal process.
Estimated Debt according to Foreign Capital
Many international publications have signaled estimates of what the external debt stock for GRZ is. Here are a few.
“Negotiations to reschedule the external public debt, reckoned to have reached US$12.69 billion by the end of 2020” – African Confidential 1st September 2021
“The African copper producer stumbled into the coronavirus crisis in bad shape, having borrowed $12bn from international creditors”. – Financial Times 16 November 2020
“The estimate does not change Zambia’s total debt load of $14.3 billion, the researchers said, but shows that the Lungu government “was not transparent about the heavy weight of Chinese financiers among its many external creditors” – Reuters 28th September 2021
“Zambia was already struggling with its $12bn external debt load.” – BBC 13 November 2020