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2. 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
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
4. Restoring Debt Sustainability in African Heavily Indebted Poor Countries
- Author:
- Cyrus Rustomjee
- Publication Date:
- 06-2018
- Content Type:
- Working Paper
- Institution:
- Centre for International Governance Innovation
- Abstract:
- Debt sustainability among the 30 African low-income countries that previously received debt relief has deteriorated sharply. More than one-third are either back in, or at high risk of, debt distress. Outcomes of the 2017 review of the International Monetary Fund and the World Bank Debt Sustainability Framework for Low-Income Countries and improvements in country-specific debt sustainability assessments can help strengthen the diagnosis of debt vulnerability and improve the quality of policy recommendations respectively.
- Topic:
- Debt, Poverty, Sustainability, and IMF
- Political Geography:
- Africa
5. Reversing Zambia’s high risk of debt distress
- Author:
- Florence Banda-Muleya and Shebo Nalishebo
- Publication Date:
- 08-2018
- Content Type:
- Working Paper
- Institution:
- Hudson Institute
- Abstract:
- A load of unsustainable debt hangs heavy over Zambia. Zambia is part of a list of 25 low income countries considered at high risk of debt distress in 2018. Government’s efforts to reduce the country’s infrastructure gap as well as bring down poverty and inequality have resulted into large spending overruns, a growing subsidy bill and a substantial public sector wage bill over the last five years. Alas, domestic revenues remained low and stagnant. So Government resorted to massive external borrowing to finance arguably unsustainable expenditure. This approach to spending pushed borrowings to about 59% of GDP as at end of 2017, which is in the territory of unsustainable debt levels. In October 2017, the IMF issued a red flag that Zambia was at high risk of debt distress, implying that the country was likely to breach the thresholds for debt and debt service indicators and, should it continue on the same trajectory, it would likely default on its debt service obligations.
- Topic:
- Debt, Poverty, Economy, and Public Debt
- Political Geography:
- Africa and Zambia
6. Are Interest Payments on Debt Derailing Fiscal Consolidation?
- Author:
- Shebo Nalishebo and Florence Banda-Muleya
- Publication Date:
- 06-2018
- Content Type:
- Policy Brief
- Institution:
- Zambia Institute for Policy Analysis and Research (ZIPAR)
- Abstract:
- This policy brief provides a review of the performance of the first quarter of the 2018 National Budget. The paper provides context by looking at both the revenue and expenditure trends during the last three years when Government instituted some fiscal adjustment measures to bring the country back to a path of fiscal fitness. In analysing the 2018 Budget, the first quarter preliminary outturns are compared to the approved Budget for 2018, the projected performance for the first quarter as well as the first quarter of 2017. We assess fiscal fitness over the last three years and determine that fiscal consolidation had begun. While fiscal performance was generally high, budget credibility and sustainability were low. In the first quarter of 2018, revenues were higher than planned and most expenditures were within the projected amounts. Nonetheless, interest payments were much higher than expected and are likely to be a major source of spending overruns in 2018.
- Topic:
- Debt, Government, Budget, Public Debt, and Revenue Management
- Political Geography:
- Africa and Zambia
7. African Perspectives on Sovereign Debt Restructuring
- Author:
- Domenico Lombardi, Skylar Brooks, and Ezra Suruma
- Publication Date:
- 09-2014
- Content Type:
- Working Paper
- Institution:
- Centre for International Governance Innovation
- Abstract:
- On August 7 and 8, 2014, CIGI's Global Economy Program co-hosted a conference with Uganda Debt Network to discuss African perspectives on sovereign debt restructuring. The proceedings, opened by the vice president of Uganda, took place in Kampala, and featured several distinguished participants — including current and former finance ministers and central bank governors, academics and practitioners, and civil society representatives — from Uganda, Liberia, Cameroon, Ghana, Nigeria, Zambia and Zimbabwe. Participants also came from civil society organizations and intergovernmental institutions representing broader groups of African countries or the continent as a whole.
- Topic:
- Debt, Development, and Economics
- Political Geography:
- Uganda, Africa, Liberia, Zimbabwe, Nigeria, Ghana, and Cameroon
8. The state of development in Africa: concepts, challenges and opportunities
- Author:
- Mills Soko and Jean-Pierre Lehmann
- Publication Date:
- 01-2011
- Content Type:
- Journal Article
- Journal:
- Journal of International Relations and Development
- Institution:
- Central and East European International Studies Association
- Abstract:
- Africa's marginalisation and development challenges are extensively documented. Africa's underdevelopment is a product of the interplay of external and domestic factors including slavery and colonialism, economic mismanagement, ill-conceived structural adjustment policies, inter-state and intra-state conflicts, failed regionalism, unfair trade terms, foreign debt, aid dependence, poor governance, weak states, and institutional decay.
- Topic:
- Debt
- Political Geography:
- Africa
9. Sudan Debt Dynamics: Status Quo, Southern Secession, Debt Division, and Oil–A Financial Framework for the Future
- Author:
- Benjamin Leo
- Publication Date:
- 12-2010
- Content Type:
- Working Paper
- Institution:
- Center for Global Development
- Abstract:
- The people of Southern Sudan are scheduled to vote in a referendum on whether to remain unified with the central government in Khartoum or break away to form a new, fully independent country. While the Khartoum government remains committed to a unified Sudan, all indications suggest that the Southern Sudanese will vote for secession by an overwhelming majority. Khartoum's willingness to accept the potential losses remains unclear. Many suspect that its ultimate actions will depend, at least in part, upon the resolution of key outstanding issues, such as oil and debt. This paper contributes to ongoing discussions about the role of Sudan's $35 billion in external debt obligations – both for a unified Sudan and a possible Southern secession. First, it examines Sudan's existing debt dynamics and the potential eligibility for traditional debt relief and multilateral debt relief initiatives. Second, it outlines potential options for dividing Sudan's external debt obligations in the event of a Southern secession. Third, it estimates external indebtedness ratios under each debt division scenario and the potential relevance of traditional debt relief treatments. Lastly, the paper provides an indicative roadmap for clearing Sudan's loan arrears of $30 billion and potentially securing comprehensive debt relief in the future.
- Topic:
- Civil War, Debt, Ethnic Conflict, and Territorial Disputes
- Political Geography:
- Africa and Sudan
10. Emerging Africa: How 17 Countries Are Leading the Way
- Author:
- Steven Radelet
- Publication Date:
- 09-2010
- Content Type:
- Policy Brief
- Institution:
- Center for Global Development
- Abstract:
- There's good news out of Africa. Seventeen emerging countries are putting behind them the conflict, stagnation, and dictatorships of the past. Since the mid-1990s, these countries have defied the old negative stereotypes of poverty and failure by achieving steady economic growth, deepening democracy, improving governance, and decreasing poverty.
- Topic:
- Debt, Democratization, Development, Economics, and Poverty
- Political Geography:
- Africa
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