LONDON, Nov 24 (Reuters) – Long delays in Zambia’s debt restructuring have crippled much-needed investment, slowed economic growth, weighed on local financial markets and increased the cost of living for people, a government said Finance Minister Situmbeko Musokotwane told Reuters.
Zambia defaulted three years ago and is trying to restructure its debt under the G20 Common Framework, a program designed to ensure rapid and smooth debt review for low-income countries.
But the process has been marred by delays, with Zambia suffering a major setback Monday, when official creditors rejected a preliminary deal between the country and its bondholders to rework $3 billion over objections over whether the deal offered comparable debt relief.
The first African country to default in the COVID-19 era, Zambia’s debt restructuring began with lengthy negotiations with bilateral creditors, including China.
“Zambia’s debt restructuring has gone on too long,” Musokotwane said in emailed comments.
“During restructuring, we face extremely limited fiscal space. We cannot attract vital foreign direct investment. We do not have access to capital markets.”
Uncertainty or negative news on restructuring progress has hit domestic bond markets, Musokotwane said, which could affect the government’s ability to fully fund the national budget.
They also made the currency more volatile, he added. The kwacha is at an all-time low of 23.525 per dollar and has weakened by more than 30% this year.
All of this has led to a significant increase in the cost of living for Zambians and impacted on the government’s ability to make vital investments.
“Projects in the water sector, among others, have been delayed by over three years and have therefore delayed the provision of drinking water and sanitation services to over 1.5 million Zambians,” he said. the minister said, adding that infrastructure projects linking some of Zambia’s poorer rural areas’ access to markets and technology were also at a standstill.
“This undermines our development agenda and impacts the most vulnerable.”
Musokotwane said the country had implemented serious reforms and was committed to improving public financial management and boosting growth.
“The problems facing Zambia are not just numbers on a spreadsheet, but impact the lives of real people. Continued delays serve no one’s interests.”
He said the government would continue discussions in “good faith” to find a solution satisfactory to all parties.
Reporting by Karin Strohecker, additional reporting by Rachel Savage, editing by Kim Coghill
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