PARTICIPANTS:
ANDREW KANYEGIRIRE
Deputy Division Chief, Media Relations, IMF
SITUMBEKO MUSOKOTWANE
Minister of Finance and National Planning, Zambia
TAHIR HAMID NGUILIN
Minister of Finance and Budget, Chad
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P R O C E E D I N G S
MR. KANYEGIRIE: Good afternoon. My name is Andrew Kanyegirire. I am with the Communications Team here with the IMF. Welcome to this press briefing with the African Finance Ministers here in Marrakech for the Annual Meetings. So, we have about 45 minutes. We have already eaten into some of the time, so we will have about 40 minutes. We will start with some opening remarks from the Ministers. And I have been encouraged to spell out that the briefing is being held within the theme of growing debt vulnerabilities within the context of lengthy debt restructuring processes.
To my immediate left, I have Minister Situmbeko Musokotwane, Minister of Finance and National Planning for Zambia. And to his left we have Minister Tahir Hamid Nguilin, Minister of Finance and Budget for Chad. We have headsets for interpretation. Have them handy. I will now pass on to Minister Situmbeko to make your opening remarks and then to Mr. Nguilin.
MR. MUSOKOTWANE: Thank you very much and good afternoon, everyone. The issue we are talking about today is debt in Africa. I start off, of course, with the very good news. Many of you would have read the statement that we issued today, which says that Zambia has finally reached agreement with the members of the Official Creditors on the Memorandum of Understanding, to formalize the understanding that we had arrived at with the creditors way back in June.
We have been discussing with the creditors and the cooperating partners, the multilateral institutions, for some time now, but I am happy that this has now arrived. What remains going forward is to sign bilateral agreements based on this MoU between members of the Official Creditors and the Republic of Zambia.
We are very delighted, we are very happy and want to thank the leaders of the OCC, that is China, France, South Africa, their Deputy Chairperson, and indeed all those that have encouraged us, the IMF, the World Bank, members of the G20, everyone. Well done. Thank you so much.
Now, for us, we see this as a steppingstone because we understand very clearly that debt relief does help, but it is not adequate by itself to uplift the living standards of the people of Zambia. So, ride on this, and together with the various reform programs that we have instituted in Zambia, to create a more conducive environment for the private sector. Our big push now is to attract private money, especially to take advantage of the natural resources that we have, namely copper, nickel, manganese, lithium, and cobalt, and of course land.
To take advantage of this, so that we make the environment good for the investors, come and mine with us. Come and do value addition with us. The economy grows up, people and jobs, taxes increase and also good for investors coming from the western world, because when we value add, when we mine more, we have more money also to buy from you. So, I am extremely delighted that this opportunity of the debt restructuring has happened.
MR. NGUILIN: Thank you very much. Ladies and gentlemen, I would like to thank you all and thank the IMF for inviting me to this discussion. I would also like to commend Zambia with the support of the Paris Club, the G20 and creditors, it has reached this milestone. As you know, Chad has commitments with the IMF and the whole financial community that support us in our program with the IMF. We have committed to restructuring our debt as part of the G20 framework. It is a pari passu restructuring involving official and private creditors. It was one of the peculiarities of our program with the IMF. Other things [are] like improving the business climate, increasing our revenue, and good public financial management.
So, on all of those points, we had an ambition, which was to go through the common framework. We were one of the first countries. We worked with our partners and donors, including the Paris Club, to create a process that was non-existent before and that has led to counter cyclical restructuring. It allows us to face any fluctuations in oil prices. In the past, we were facing constant reimbursement, even though our revenue was dependent on oil price fluctuations. When the program started with COVID-19, oil prices had dwindled, and the cost of our debt had become unsustainable.
Today, things have changed, thanks to the support and cooperation of all our creditors. Now our debt has become sustainable. Thanks to the reforms, we have been able to improve the macroeconomic framework and now we are enjoying good growth in our revenue and a return of investment [inaudible]. We wished for things to move faster than when we started. It took 18 months because of unforeseen events in the program and changes in the teams. It was a close call, but finally we made it. And that is the lesson that I have learned from it. And there is life after debt restructuring.
When the fundamentals are strong and when restructuring has happened in good terms and we have enough leeway, we hope to receive funding from traditional bilateral and multilateral partners, in line with our commitments and the lessons that we have learned from the process. As pioneers, I am pleased to know that Zambia has also reached this stage. Thank you very much.
QUESTIONER: I just wanted to follow up on the issue of lessons learned out of this process, particularly out of Minister Situmbeko, given it has taken you three years. And I wanted to ask you, with the benefit of hindsight, perhaps things that could have been done differently, that perhaps will help other countries that are sort of in the same path to learn from the process that you underwent. In part, I am asking you to critique the process, obviously without critiquing the partners that you worked with on that front. Thank you.
MR. MUSOKOTWANE: Thank you very much. Just a slight correction to start with. It has not taken three years. It has taken less than that. From the time when we started engaging to the time when we had the members of the Official Creditor Committee saying, yes, we give you the financial assurance, it took nine months. Of course, even that is on the long side. I would say partly because there was a learning process by everyone concerned, the creditors, ourselves, and members of the international community, there was a learning process. And indeed, we can see now that the process for those who are coming behind us is moving faster. All said, I would encourage colleagues, those who feel that they are vulnerable to debt, to come out early enough and engage. Here we are. We are where we are. Engaging did not get us swallowed by the crocodile. Instead, it has delivered us to something that is good. So, I would encourage my colleagues to come in early.
QUESTIONER: Thank you very much. Minister of Zambia, your colleague, Minister of the Environment, said that there were plans to issue green bonds. Now, are they any cheaper than regular bonds? And can we have some details and any timelines if there be? And then finally, how do you deal with the effect of El Niño on food, especially given that the food prices are already surging? Thank you.
MR. MUSOKOTWANE: Is that to me or? Okay, good. The green bonds, obviously, that is part of our response to getting the economy to be greener. And we encourage those to encourage members of public to participate in those, to do various things like developing power sources, like solar and many other things. Green bonds do not necessarily mean that it is government to issue those. Private sector can also issue the green bonds. All we have done ourselves is to provide fiscal, or tax incentives, for the private sector to be encouraged to issue and to buy green bonds.
The looming of what has been said that might be a good bad rain season coming around the corner. Yes, that is the prediction that has been said. Our response to that we are in the 2024 budget and even the past few years, putting manner aside to be able to capture water, to harvest water, so that increasingly more and more farmers are able to irrigate.
On top of that, as part of those reform measures that I have talked about, given the huge land resources that Zambia has, we are opening up farm blocks, huge tracts of land where we are putting infrastructure like roads, power, develop water, and then encouraging our people, but also the corporate world. Whether they come from Argentina, whether they come from Brazil, whether they come from South Africa, whether they come from here, to come and make large scale investment in agriculture because they have the money. They do not need to come to the government of Zambia to say give me money to do irrigation. They have got their own money. Our responsibility is to put up the infrastructure.
So, with [inaudible], a combination of supporting our farmers, but also opening up for those with the deep pockets to come and farm in Zambia to feed ourselves, feed the region, feed the world. That is part of the response.
MR. KANYEGIRIE: So, we will go all the way to the back. Rachel, I will come to you. Let us go to the gentleman at the back. Let us try to keep it brief, pointed.
QUESTIONER: My name is George Wiafe from Ghana, JOY FM. To the Minister of Finance, Zambia. Following up from what my colleague earlier asked, to be more specific, Ghana is on a similar path. What advice should you give to Ghana? The dos and don'ts, to ensure that we are able to fast track our engagement, to get a deal with other partners. And was China the biggest challenge in trying to convince them to come or secure this MoU? Thank you so much.
MR. MUSOKOTWANE: As I said, this is really the first time that we are confronted with a situation of external debt different from what we used to have in the 80s. Because those days, I think, especially for Zambia, most of what we owed was to the multilateral institutions. Now most of what we owe was to bilaterals. And it is a learning process. For the lenders, it may have been lending process. For us, also a learning process. I think Ghana is, I do not want to comment about Ghana because I am not responsible for that. All I can say is that for us, the most important thing was to accept that we have a problem, yeah? Right from the very beginning, Zambia, we accepted that we have a problem. Let us not hide it under the carpet, come out and say you have a problem.
After that, we searched around and say what are the possible solutions? What was on the table was a common framework. We searched around to say what else is available to solve this problem. The only thing that we saw as being viable was a common framework because it was supported by the international community having discussion amongst themselves. So, we said this is the route to go.
The third thing, to get the support of the international community, lenders, and other people, obviously, they must come to the conclusion that you are worthy of their support. You are worthy of their support. You are willing to take steps to assist yourself. Otherwise, what would be the point in assisting anyone who is not serious? So, we concluded, not even concluded, we are convinced that we needed to reform ourselves. Obviously, there was a problem. We needed to undertake reform, reform of making sure that we do not allow a federal currency of debt in the future. So, we put a law in Parliament which tied my hands to say, going forward, you cannot be as like those in the past. So, we tied our hands for Parliament to have more power and the restrictions on borrowing.
We also say to ourselves, money is now limited. This money is going to be spent on the most critical of all interventions, making sure that no one is left behind. So, we put a lot of money on education, making sure that every child that can do it should go to school, up to high school level, without wondering who is going to pay for them, because government will want to pay for them. We had to make shifts in their priorities. To be able to pay for every child in school, we had to end subsidies on fuel because we could not do both. You maintain subsidies on fuel, it means you cannot be able to spend the money for the school children. So, we had to make those hard choices.
So, in short, what I am saying is that we are to maintain or establish credibility among the creditors. We are to establish credibility among the donors. We are to establish credibility among our own citizens, that the savings that we are going to make out of this is money that is going to support the aspirations.
MR. KANYEGIRIE: Thank you. We have some questions online. We will do one more in the room, then we will go online and then come back. So go ahead, Rachel.
QUESTIONER: Thank you both Ministers. merci beaucoup. To the Minister of Chad, given that your debt restructuring did not actually involve any reduction in debt at the moment, can it really be called a success? And in the future, would Chad still consider taking on oil backed loans or is that something you do not want to do again? And to the Honorable Minister of Zambia, at what stage are negotiations at with commercial creditors? When can we expect news on similar deals with commercial creditors? Thank you, merci beaucoup!
MR. NGUILIN: Merci Beaucoup. Thank you, ma'am. I will try and respond to your question. The restructuring is contracyclical because it involved initially a reduction in principle, assuming that the price remained, the oil prices remained at the same level as 2020. But because the prices went up while we were negotiating with our creditors, all other things, all other parameters being equal, plus our own income went up. So, we found ourselves in that situation where creditors accepted pari passu, to take a cut, a reduction, if the prices went back to their 2020 levels.
As to the second half of the question as to we would consider in the future oil backed loans. Look, that was no longer an option, although the loans we are talking about here were not that kind. That was a buyback of shares of an oil company. So, when you buy shares, you take the asset and then you pay with the proceeds. You pay back the debt with the proceeds of the assets.
But when the prices collapse and the contract is not all the clauses have been worked out, the proceeds from that asset may not be enough and may not be adequate to pay back the debt. And so that may impinge upon other commitments. Anyway, all that was finalized in 2018.
Back in 2018, we did not expect oil prices to go below $30. In 2020, we were down to almost nil. So mathematically, it was impossibly and so the debt was not sustainable. And because the outlook produced by forecasters, Bloomberg or the IMF, the forecast was that oil prices, at least in the midterm, would remain low. And so therefore, we had to find a way to renegotiate the debt. So that is what we did. That went on for 18 months. And in the meanwhile, as we were negotiating, the prices went back up.
And well, as the negotiation moved forward and all the stakeholders agreed, well, the only concern is that prices should not collapse again. So, we decided to settle and reorganize the contracts in a sturdy way. Now, whether the oil prices collapse or not, as regards the paying back of the debt, that is settled. Thank you.
MR. MUSOKOTWANE: Progress with the commercial creditors, all I can say is that we are heavily engaged with them, and we are pleased that at least on the Official Creditors, that is progressed a lot. And we believe this may leverage the discussions with the private creditors. Thank you.
MR. KANYEGIRIE: Thank you, Ministers. We will go virtual online. There are some people who have been waiting. Katerina, I believe you have your camera on. We will come to you first. Please go ahead and introduce yourself.
QUESTION: Katerina Hay with Bloomberg. Good afternoon. Bonjour, Mr. Minister. A question for the Minister of Chad, Mr. Nguilin. Following up on that question, how much of the debt has Chad paid off compared to before you reached an agreement with your creditors? Has the speed increased since that is, are you paying off debt faster now? And then, finally, when do you expect to have paid off the debt to creditors that took part in the G20 Framework?
MR. NGUILIN: Well, by and large, we started working on the debt. Well, we started back in 2018 and from 2018 to today, all included. Well, of course, we have reduced the debt burden. We have actually paid more from one year to the next. And now the debt to ratio, to GDP ratio is about 25 percent, probably even less. So, we can say that we are one the countries, at least in French speaking Africa, with the lowest debt to GDP ratio.
Now, we found ourselves in a situation where a large amount of the payments was concentrated in a short period of time, and that is what made it unsustainable. But in the longer term, the picture is quite different. And that is why the whole purpose was to extend the timetable, the payment schedule. As to commercial, that as the oil prices go up, the share, well, the debt burden becomes lighter because we share the surplus between the treasury and the payment of the debt. And had this upward trend continued; we would be able to pay off the entire commercial debt.
The rates are better because in the 2018 negotiations, we decided to bring down the interest rates to a more acceptable level, so there would have been less of a burden to the treasurers. That is why, as part of this exercise, we capped the ceiling of, we capped the amount that had to be paid off, the rest being rescheduled. I believe that the young lady is well familiar with the situation.
MR. KANYEGIRIE: We will take another question online. Masauso Mukwaya of CNBC in Zambia. If you can come through, I understand you do not have your camera on, but if you can maybe speak to your question. Masauso.
QUESTIONER: Good afternoon. Thank you. My name is Masauso.
MR.KANYEGIRIE: We cannot hear you clearly, but I understand your question is somewhere along the lines of how much progress has been made in negotiations with private creditors. And this is the question for you, Mr. Minister of Zambia.
MR. MUSOKOTWANE: As I just mentioned a few moments ago, we are engaged with the private creditors, discussing with them, and we will be reporting back to them as and when we make progress. Thank you very much.
MR. KANYEGIRIE: I think we have about eight minutes left. We can do another quick round. We will come back to this side.
QUESTIONER: Thank you very much. Ramah Nyang, Bloomberg. Minister Situmbeko, this is for you. Could you give us any more details on the terms that essentially, you have agreed to between Zambia and your official bilateral creditors? Because back in June we saw reports of a reduction in present value terms of the debt by around 40 percent. There was an extension of maturity as well, I think all the way to 2043, and a pretty significant reduction in interest rates as well. Are the terms that you agreed to this week the same as what we had back in June or has there been a substantial variation in between those two times.
MR. MUSOKOTWANE: Thank you. I cannot obviously give you very specific terms because those are beyond me. If we were to sit with my officers, they will be able to give you the answers to those. But let me just elaborate on the basic principles. The basic principle is anchored on the debt sustainability analysis, which takes into account, firstly, the amount of debt that is outstanding and how it is going to be paid.
Secondly, the issue of the size of the economy. So, all this is anchored on the principles of saying what we know about the economy going forward every year is like this, and the current unstructured debt demands of that economy that you pay like this. But the economy can only sustain so much without which you fail to provide basic services. So can the debt be restructured in such a way that you will be able to service the debt, but without crippling the lives of the people? Those were the basic principles under which this debt was extracted, and it remains the core of whatever we discuss.
QUESTIONER: I work for Africa 24 TV Channel, and I have questions for both our guests. I will start with the Chadian Minister. Sir, in three years' time, the economy of your country has made huge headway from 2.1 percent in recession to plus 2.5 percent in 2022 and now we are looking at 4 percent growth.
Based on recent estimates published by the IMF how do you explain such a good performance when the country is leaning less and less on oil, which is what enabled it to achieve double digit growth about ten years? Concern climate change is definitely a burden that Africa has to bear, and it is seriously affecting the continent. One of the questions raised here was that of the cancellation of African debts by the IMF and the World Bank regarding the implication of rich countries in the climate change that seriously affects Africa. What is your opinion about that?
Also, as we are leading to the end of this summit, what is your opinion about what are the key conclusions of these annual assemblies regarding financials in Africa and the relations between your countries and the financial institutions? Thank you very much.
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MR. KANYEGIRIE: I think we can probably start with Minister Nguilin and then come to Minister Situmbeko.
MR. NGUILIN: Well, there was an improvement. I said so in the introduction. There was a macroeconomic positive development and that was brought about by a better business climate. It is easier to start a business in the country. You had companies that were in major trouble in 2018, 2017. They were reassured, they actually got loans, and they were able to invest, they were able to produce, they were able to hire. And government has improved public spending to focus it to the sort of job creating areas.
And the government ensured more security in the area. You may remember this is a sometimes-troubled area and also government improved industrial relations. You may remember that back in the year 2016, there was a cut in civil servant wages. So, we reversed that.
As I said, business climate improved. Companies that had been in the red for ten years started making profits. So, there was a virtuous cycle setting in and now we are looking at an upward trend and we have reason to hope for even better growth number than we have now. If you look at the kind of income, various types, we have corporate income tax, we have VAT, we have other forms of fiscal income. And based on all that, we were told three or five percent growth. But if you look at the growth in corporate sector in the real economy, we are looking at better figures than that. So maybe there is some optimizing to do.
But still, we are very happy with the performance, and we're also delighted with the partnership, including the IMF and the World Bank. But of course, the partners also have enlarged the packages for our country and Africa at large. But we can still do better. And that is part of the discussions we are having here at the Annual Meetings. And I think this will bear fruit in years to come.
MR. MUSOKOTWANE: Quickly, there was an issue about climate change. Yes, it is there, but for us, we have always emphasized that we need to be part of the solution to climate change, because climate change is about decarbonizing the world. Our participation, that our contribution, that is the fact that we have got the minerals that are key towards that. Copper, cobalt, manganese, nickel, lithium.
So, in line with that, we are creating conditions for more and more mines to be opened and also creating conditions for value additions to these minerals, whether it is electrical motors, whether it is batteries. We are saying to the investors, come, we have reduced the burden of doing business. Come and do business in Africa. Come and make money. Come and pay taxes in Africa.
On my takeaway from this particular meeting, I think four important points. Number one is continued commitment for the world to assist those of our colleagues who are still debt driven, debt under debt stress. That commitment to assist them was repeated here.
We also heard very powerful words from President Banga of the World Bank, recognizing that some of the processes within the Bank take too long. I think we heard about how long it takes from recognizing a project to the time when the first check is delivered, takes too long. These are the complaints that we have been making. To the extent that management is recognizing those, we are extremely delighted. We look forward to them actually concretizing this.
Thirdly more voice for Sub-Saharan Africa. We have been given an extra seat on the board to bring the total to three. And finally, the resource gap, because we still need resources as we develop our economies. That resource gap from concession of lenders, from donors, it was identified filled in this particular meeting. So, we are happy with that. Those are the four takeaways from these Annual Meetings.
MR. KANYEGIRIE: We can take one last question. The gentleman in the blue suit, I think he had his hand up earlier. The last question, we can make it quick.
QUESTIONER: Thank you very much. You mentioned climate as a problem, as a challenge, so I will just follow up on that. What was discussed in terms of climate challenges at the minister's meeting and what are your expectations, what COP28 is going to deliver for the continent and UAE as a host? Has it really pushed your voice, your concerns, ahead of the summit next month?
MR. MUSOKOTWANE: I think, as I said, for us we see this as an opportunity. Of course, it is a challenge, but what more positive, we see the opportunities. UAE is a country with a lot of money, they do not even know what to do with it. So, we are saying come to us, here is the land, here is the water, here is the power, here is the road, let us grow food here so that we can sell it back to you. Let us grow food here so that we can sell it to those who need. So, let us focus on the opportunities rather than putting our arms in the air. So, this is the approach that we take.
MR. KANYEGIRIE: Thank you very much. Thank you, Minister Situmbeko. Minister Nguilin, thank you very much for your time. As all members of the press, transcript will be available on the website www.imf.org. In terms of follow up queries, you can reach out to us, media@IMF.org, and we will pass you on to the ministers' press teams. Thank you very much.
