Zambia will rearrange loans from Chinese companies and instead look to borrow directly from the Asian giant’s government in a bid to satisfy International Monetary Fund conditions and unlock a potential $1.3 billion loan from the multilateral lender.
On Saturday the Zambian presidency said borrowing directly from the Chinese government would ease the repayment burden after the IMF on Friday rejected Zambia’s latest plan, saying it would make it harder for the country to sustain its debt load.
The presidency and treasury did not respond to requests from Reuters to clarify whether the Chinese government would now underwrite the loans from the firms or grant Zambia new loans.
It was the second time in under six months the IMF had rejected a Zambian proposal, causing the southern African copper producer’s dollar-denominated bonds to fall across the curve on Friday.
“The decision was made before we restructured our Chinese loan,” presidential spokesman Amos Chanda said, referring to the IMF rejection. Chanda said there was “no possibility of default” on current and future debt.
”We will not go to the ends of the earth to pursue an IMF programme. If it does not come, we will continue with our own programme, which is already delivering results,” Chanda said.
Zambia’s total public debt at the end of August 2017 stood at $12.45 billion representing 47 percent of gross domestic product.
The country issued Eurobonds worth $2.8 billion between 2012 and 2015, and has said it plans to refinance those bonds to cut the cost of debt servicing in a broad strategy to keep debt levels from spiralling.
“Our future engagement with the IMF will be anchored on investment in the social sector. What is best for Zambia is what the government has put across since November 2015,” presidency spokesman Chanda said.
Earlier in the week president Edgar Lungu appointed new finance and mining ministers in a reshuffle affecting numerous other departments, heightening concerns over the country’s financial and political stability.
Reporting by Chris Mfula; Writing by Mfuneko Toyana; Editing by Andrew Bolton (Reuters)