ACTIONAID Zambia country director Nalucha Nanga Ziba says the AfDB situation shows that Zambia does not have funds reserved for debt servicing.
Two weeks ago, the African Development Bank imposed sanctions on Zambia after government failed to pay US$1.4 million debt.
Ziba said this confirmed the fear many stakeholders have concerning borrowing.
“Capacity to timely pay back the loans we have recklessly borrowed as a country. Zambia failed to timely settle the USD 1.4 million in debt repayment which prompted AfDB to issue sanctions. It seems government managed to settle the loan which led to lifting of the sanctions,” she said.
“This situation is of great concern on account of the following: Zambia Eurobonds are due to be paid in 2022 & 2024. The situation with AfDB shows we do not have funds reserved for debt servicing. Instead it seems that we rely on attempting to raise funds when loans are due to be paid.”
She stated that this was an illogical thing to do especially in an economy with a depreciating currency, making debt servicing more expensive.
“For example, if we wait until 2022 to raise funds to clear the first Euro bond in dollar, who knows how much the kwacha will trade against the dollar. Perhaps it will be K20 per dollar. This implies that it will be very expensive to service the Eurobond. The much talked about sovereign fund seems to be hoax as the AfDB situation just shows that there is no money in the sovereign fund,” stated Ziba in a posting on ActionAid’s Facebook page.
The Zambian government later managed to raise the money to pay AfDB.