ZAMBIA borrowed the US$750 million Eurobond in 2012 and later $1 billion in 2014 with the full knowledge and intention of paying back with interest.
The payments are slated between the 2022 and 2024.
The money obtained through these loans from the international market was meant to support growth in areas of infrastructure projects such as energy and transport, among others.
Obviously, with the unprecedented gain of the United States Dollar, and other changes in the macro-economic situation globally and locally, it is prudent that the Government comes up with measures that
will help ease successful repayment of the funds.
The Zambia Institute for Policy Analysis and Research (ZIPAR)’s recommendations that the Government sets up a Sinking Fund contain public expenditure and refinance the second bond is, therefore, praiseworthy.
This is because the suggested measures would help reduce the risk of defaulting.
The suggestion is timely considering the fact that this money would attract in excess of $125 million interest each year, coupled with a tight two-year period when each of the 10-year bonds will mature.
Equally magnanimous is the positive response from the Government which, through Finance Permanent Secretary Pamela Kabamba, yesterday indicated that it would critically consider the recommendations from ZIPAR.
We agree to the suggestion that the Government should reduce the need to borrow more by broadening the current tax base and by strengthening the revenue collection.
This is the only way the Government could, while saving the loan installments, continue with its service delivery to its citizens.
Amid loan repayment obligations, the Government needs to continue constructing roads, building hospitals and schools, and providing other public goods as well as services.
It is interesting that the Government has already indicated willingness to go by the suggestion of setting up a Sinking Fund as a way to insulate loan repayment against future adverse macro-economic
conditions.
The need to refinance, especially the second bond, comes about in view of the relatively tight terms – which are seemingly against the borrower, in this case the Zambian Government – under which the loan was procured.
It is further heartwarming to note that the Zambian Government’s use of Eurobonds would bear fruit, especially in the long-term, in that the funds were mainly invested in the energy and transport sectors,
areas of job creation.
With the aforesaid, ZIPAR deserves commendation for releasing the sovereign bond study with such valuable recommendations.
It remains for the Government to work with various stakeholders and think-tanks to ensure minimising of the risks in paying back while ensuring credibility and integrity of the country in the eyes of the
international community.
This is because any default by Zambia, in terms of loan repayment, would greatly dent the country’s creditworthiness, for which the Government administrations, past and present, have worked hard to
attain.
Currently, the continued attraction of the Eurobonds and other types of loans is not by accident.
It is as a result of the creditworthiness the country has acquired over the years, otherwise all lenders would be shunning any maneuvers for Zambia to borrow from them.
It is, therefore, imperative that the country does not default on the current debt stock so as to maintain its ‘good name’ among its potential lenders.
With limited experience of borrowing from international markets, Zambia has no choice but to meticulously learn from other countries which have had experience in the exercise.
For now, we have no reason to doubt that if the Government implements most of these proposed measures, it will be able to repay the loans with minimal challenges.
We equally have no reason to doubt that Zambia will once more rise to the occasion and clear the two Eurobonds.  OPINION