ZAMBIA’S President Edgar Lungu has requested debt relief and cancellation from China due to the economic impact of the coronavirus pandemic, his office said.
Lungu made the appeal in a telephone call with his Chinese counterpart Xi Jinping on Monday.
‘President Lungu called for debt relief and cancellation in light of reduced revenue due to the negative impact of the pandemic, as well as competing needs for the country, to secure adequate resources to fight the pandemic and to stimulate the economy,’ the presidency said in a statement released late Monday.
Africa’s second-largest copper producer is one of China’s prominent debtors, owing billions of dollars.
China’s Xinhua news agency reported on Monday that Xi said the two countries’ battle against the Covid-19 pandemic was expected to help improve their relations. Xi said that China and Africa had stood together in the face of the outbreak. China would continue to do what it could to help Zambia and other African countries beat the pandemic and restore economic and social development.
‘Chinese project finance loans to Zambia amount to between $6bn and $9bn, based on unofficial sources,’ said Robert Besseling, director of risk assessment firm EXX Africa.
‘However not all the funds have been disbursed, while the Zambian government itself has been unable to account for its obligations to China. An official audit has been withheld for several years,’ he said.
Zambia’s external debt is projected to soar above 60 percent of GDP in 2020.
The IMF last week predicted that Zambia’s economy will contract by 5 percent in 2020, compared with growth of 1.5 percent in 2019, due to the coronavirus pandemic and severe drought.
To date, the country has recorded 3,326 coronavirus cases and 120 deaths.
The landlocked country has defaulted on repayments of loans acquired for several construction projects, including Chinese funded ones, resulting in some being suspended or abandoned.
A $2bn hydropower station bankrolled by the government and foreign financial institutions was supposed to go on stream in 2020 after construction started in 2015, but was put on hold after failing to acquire additional funding, according to Besseling.
EXX Africa expects Zambia’s debt rating to ‘deteriorate significantly in 2020’ and says it will remain ‘one of Africa’s worst country risk performers in the year ahead.’
‘Zambia’s sovereign has been unable to maintain payments on various loan agreements and contractor commitments over the course of 2019,’ said Besseling.
Mining revenue dropped nearly a third between February and April in 2020 due to the coronavirus pandemic, according to the country’s mining chamber.
Nearly half of the country’s tax revenues goes towards debt servicing.