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1. An Analysis of the Legal Framework for Public Debt Management in Zambia

Author:
Florence Banda-Muleya, Mbewe Kalikeka, Zambwe Shingwele, Philip Ngongo, and Shebo Nalishebo
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
Zambia’s current legal framework for public debt management is inadequate. The high level of external debt standing at US$11.2 billion and domestic debt at K80.2 billion due to fast pace of debt contraction; the resulting heightened risk of debt distress; and the weak implementation of the 2017-2019 Medium Term Debt Strategy (MTDS), raise questions on the adequacy of the laws that govern public debt management. Now more than ever, with Zambia quickly headed to its first bullet repayment on its Eurobond debt, the country needs to enhance its legal framework on Public Debt Management (PDM).
Topic:
Debt, Government, Economy, and Public Debt
Political Geography:
Africa and Zambia

2. A Review of Pillar I & II of Zambia’s Economic Stabilisation and Growth Programme 2017-2019

Author:
Florence Banda-Muleya, Shebo Nalishebo, Mbewe Kalikeka, Nakubyana Mungomba, Ignatius Masilokwa, and Caesar Cheelo
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
The economic crisis of 2015 destabilised Zambia’s economic performance. The depreciation of the Kwacha and its pass-through effects led to inflation of as high as 22% and growth, at 2.9%, was far below the 5% target. The overall Budget deviation was 15% of Parliamentary appropriations in 2015, disrupting planned activities and attainment of set macroeconomic objectives. There were huge variations between what the consequent national Budgets committed to do and what they actually did. To fix this and nudge the country back towards high sustained economic growth, the Economic Stabilisation and Growth Programme (ESGP) was crafted in 2017. The five-pillar plan aimed to ensure prudent fiscal management by providing a system of accountability and a standard against which results could be measured, among other things. The aim of this paper is to review the ESGP, particularly, its performance in 2018. The paper sets out to understand how well Zambia faired in implementing the ESGP as well as to highlight the broader fiscal trends recently. It ultimately seeks to make recommendations about how Zambia can revive its path to economic stability and growth. The paper focuses tightly on the first two pillars of the ESGP, i.e. (i) restoring budget credibility; and (ii) enhancing domestic resource mobilisation and refocusing public expenditure. The remaining three pillars are slated to be reviewed in the second half of 2019.
Topic:
Budget, Finance, Economic growth, and Economic Stability
Political Geography:
Africa and Zambia

3. Towards 2022: Options for paying back Zambia's Eurobond Debt

Author:
Mbewe Kalikeka, Shebo Nalishebo, and Florence Banda-Muleya
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
On 20th September 2022, Zambia’s first Eurobond will mature. The Government will be required to settle its principal payment amounting to US$750 million in full. Twenty months later in April 2024, the Government will have to settle the second Eurobond worth US$1 billion. The third US$1.25 billion Eurobond will be paid back in three instalments in July of 2025, 2026 and 2027. With less than three years before the first Eurobond matures, there is no clear indication of how and where the money to pay back these Eurobonds is going to come from. This paper considers several options that will mitigate the possibility of a default when the principal payments on the Eurobonds are due. The lack of a payment strategy has made the bondholders jittery about whether they will get their money back. Bondholders have communicated their consternations by dumping the Zambian bonds which are perceived to be risky. With increasing yield rates on the three Eurobonds, of about 17% by end-September 2019, the market seems to have already priced in a default – only nations already in default, such as Venezuela, have yields as high as Zambia’s1. The yield rate is the barometer used to assess the risk inherent in the bond. In general, higher yields mean the bond has higher risk and corresponds to a decline in the value of the bond. There have been efforts made towards establishing a Eurobond Redemption Strategy, but its contents are yet to be publicised. Also, the failure to release the 2020-2022 Medium Term Expenditure Framework by September 2019, and the absence of the 2020-2022 Medium Term Debt Strategy to show a clear borrowing plan have added to the market apprehension. By just about every measure, the Zambian economic fundamentals are fragile. Growth is ailing, prompting the authorities to revise their growth projection targets from 4% to 2% in 2019. Agriculture has been in recession for several quarters now. The 2019 mining fiscal regime that has significantly raised the tax burden on mining companies to unsustainable and uncompetitive levels, coupled with reduced ore grades, has resulted in 8.4% reduction in mining value added in the second quarter of 2019. The electricity load management which commenced in mid-2019 continues to have adverse economy-wide effects. This has implications on revenue targets. Tax revenues in September 2019 were 17% lower than projected, a trend likely to continue at least up to the end of the year. Further, the recent weakness of the Kwacha is not helping either as it has increased the cost of external borrowing and debt servicing, making it prohibitively more expensive to service foreign-currency denominated loans, which include the Eurobonds.
Topic:
Debt, Economics, Markets, Public Debt, and Eurobonds
Political Geography:
Africa and Zambia