Zambia is skirting the edge of financial default. If I held the country's paper, I would be nervous.
Zambia's external debt had been reduced to under $1-billion by 2006 as a result of various global forgiveness schemes. Then, akin to a recovering alcoholic, the Zambian state was supposed to stop drinking, get a paying job, and become a productive member of society.
But like many drunks, sadly, Lusaka quickly fell off the wagon. Governments hate curtailing expenditure, even of money they don't possess, because they want to be liked. Spending also offers opportunities for enrichment. So rather than staying out of bars, they started to buy everyone in the local saloon rounds using other people's money.
Foreign debt has today ballooned to $9.5-billion, excluding government guarantees estimated at $1.2-billion. In the process the debt-to-GDP ratio has increased from 25% in 2012 to more than 70% in 2018 through a combination of regular borrowing from the Chinese and other development partners, a $3-billion Eurobond issue over three years (2012, 2014 and 2015), taking out "bridging loans" from the Bank of Zambia and syndicated loans with commercial banks, scaling up the issuing of government securities in 2016 and 2017, and the conversion...