"Transparency offers way out of Zambia debt crisis", 18 October 2020

Zambia, Africa’s second-biggest copper producer, came to the eurobond debt markets in 2012 with great fanfare. Its maiden issue, a $750m 10-year bond, carried a modest coupon of 5.6 per cent. That seemed to herald a new era for African borrowers. After receiving debt relief under the Highly Indebted Poor Country initiative, a string of governments were able to tap the international debt markets and subject themselves to market discipline. [...]

Then there is Chinese debt. Zambia is not the only country to have ramped up borrowing from China. [...]

One answer to this conundrum is more transparency. Chinese banks, whether state-run or quasi-commercial, should be more open about what they are lending and on what terms. Zambia’s government too needs to come clean about its borrowings and finances. The suspicion is that President Edgar Lungu’s Patriotic Front party is building a war chest for next year’s re-election campaign.

Zambia can help allay these fears by agreeing a long-talked-about IMF package. That would bring external scrutiny and comfort to lenders that it is serious about putting its finances in order. Nor need this compromise Zambia’s efforts against Covid which has so far claimed a relatively few 350 deaths. The IMF has been clear it will not force countries to axe health programmes in the interests of fiscal rectitude. [...]