Zambia has just submitted a request from China in excess of $8 billion in loans and grants under the Forum on China-Africa Corporation (FOCAC).
Zambia is also seeking a $1.6 billion loan from the International Monetary Fund (IMF). If both loans are approved, Zambia’s debt will now be close to $20 billion US Dollars, almost equivalent to the country’s Gross Domestic Product (GDP). Zambia’s GDP is only 21.2 billion US Dollars.
Yang Youming, the Chinese ambassador in Zambia told The Southern Times last week that Zambia has applied for loans to undertake infrastructure development for roads, bridges, energy as well as rehabilitating and construction of hospitals. Southern Times is a newspaper funded by Zimbabwean president Robert Mugabe and is based in Namibia.
According to ministry of Finance sources, of the $8 billion Zambia is seeking, only 2 percent are grants, the rest is a loan repayable with the next 15 years.
Despite this reckless borrowing by the current regime, experts have already warned of the dangers Zambia is heading into.
According to the Zambia Institute for Policy Analysis and Research (ZIPAR) 2017 national budget analysis, the country’s external debt, which rose between 2015 and 2016 following increased borrowing, was in danger of breaching the sustainability threshold of 56 per cent of GDP. With loans from China and IMF, Zambia’s loan will be about 98 per cent of GDP.
Zambia’s debt has been increasing considerably following the issuance of three Eurobonds. The country issued three Eurobonds of 750 million dollars in 2012, the second one of 1 billion dollars in 2014 and a further 1.25 billion dollars in 2015.
According to government figures, the debt was standing at 9.44 billion dollars as at September 2016, comprising 6.7 billion dollars of external debt and 2.7 billion dollars of domestic debt.
Now with this $10 billion ($1.6 billon from IMF and more than $ 8 billion from China), Zambia’s total debt will be pushed to $20 billion.