AfDB president Dr Akinwumi Adesina addresses partners during a meeting in Zambia, July 2023
Zambia's success in restructuring its $6.3 billion bilateral debt under the G20 Common Framework continues to draw support from regional and global institutions.
These institutions seek to ensure that the country sticks to the agreed debt arrangement, tackles debt owed to private commercial creditors--including Eurobond holders--and implements reforms critical to its economic recovery and growth.
The African Development Bank Group convened meetings in Lusaka last week, bringing together representatives from the United Nations, the European Union, the International Monetary Fund, the World Bank, foreign governments--including the United States and the United Kingdom--as well as the private sector to rally behind Zambia with financial and technical support. African Development Bank President Dr Akinwumi Adesina led a delegation to the meetings. "The starting point is to now make sure the debt treatment works, and that Zambia does not again return to a debt crisis," he said.
Adesina outlined several measures that, once approved by the Bank's Board of Directors, will deliver a total of $318 million comprising $150 million for budget support to Zambia from the Bank. The remaining annual allocation of $168 million will be drawn from its concessional window, the African Development Fund, to finance large transformative infrastructure, including energy, road and rail transport connections with Mozambique, Angola and the Democratic Republic of Congo.
The Head of the European Union delegation in Zambia and the Common Market for Eastern and Southern Africa (COMESA), Jacek Jankowski said the EU had resumed budget support to Zambia starting with €299 million. "In addition, the European Union will provide €60 million for health and education, €30 million for the rehabilitation of the Kariba Dam (which provides a third of Zambia's power generation) and the remaining €20 million will support smallholder farmers," Jankowski said.
The World Bank has already approved a $275 million development policy operation for Zambia in support of the country's reforms to restore fiscal and debt sustainability and promote private sector-led growth. The IMF last August approved a $1.3 billion program over three years to support the government's reforms to help bring public debt back under control.
IMF Resident Representative in Lusaka, Preya Sharma, said Zambia was "doing a lot on reforms". "It is undertaking large and important reforms including the removal of fuel subsidies, improvements in public debt management and governance," she said.
Most of Zambia's external debt is held by bilateral creditors, but there was a rapid growth in private debt that almost tripled within six years to $18.8 billion in 2020.
The African Development Bank is offering Zambia the full services of the African Legal Support Facility (ALSF) to renegotiate the terms and conditions of debt with private external creditors. The ALSF, established in 2008, has assisted several countries in creditor engagement and negotiations related to debt restructuring and relief. In 2021, the ALSF government savings in underlying transactions worth $14.8 billion.
President Hakainde Hichilema of Zambia has spent his first two years in office fighting to free his country from the grip of what he described as a "python of debt". "It was impossible to do anything. We have lost a lot of time under the python of debt. We want the economy to function to help the government deliver for the people of Zambia," he said.
Zambia needs technical and advisory support to deliver reforms in public financial management, public debt management, public investment management, streamlining procurement rules and systems, strengthening of public-private partnerships, domestic resource mobilisation, increasing transparency and fighting corruption.
AfDB president Dr Akinwumi Adesina addresses development partners during a meeting in Zambia, July 2023
At a separate meeting, Dr Adesina told private sector CEOs to take advantage of emerging opportunities and invest more in the country. The bank chief gave the example of the agriculture sector where "the Bank will provide support to help Zambia's reform its farm input support programme to be more efficient, transparent and delivered by the private sector, using biometric registration of farmers and use of electronic vouchers to deliver support directly to farmers." The president of Zambia's Chamber of Commerce and Industry, Chabuka Kawesha, pointed to the weaknesses of the energy sector. "Power delivery is quite poor, especially in terms of transmission which is needed to spur power generation," Kawesha said.
Development partners are convinced that the government under President Hichilema, a businessman and farmer, will create the much needed enabling environment for the private sector to play a leading role in investing across other key sectors such as the financial, transport, energy and mining.
AfDB president Dr Akinwumi Adesina poses with development partners during a meeting in Zambia, July 2023
