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Situmbeko Musokotwane, Finance and National Planning Minister, says US$5.8 billion in debt service savings will be generated following the debt restructuring deal with official bilateral creditors.
Musokotwane also told parliament on Tuesday in his ministerial statement on debt restructuring agreement with official bilateral creditors that official creditors had agreed with the government that domestic debt would be excluded from any treatment.
The debt restructuring agreement covers about US$6.3 billion of Central governments’ debt owed to external bilateral creditors and the debt of ZESCO that has been guaranteed by government and also owed to official bilateral creditors.
He pointed out that in the absence of debt restructuring, Zambia would have to pay US$6.3 billion in debt servicing official creditors in the next 10 years.
He, however, said with the restructuring, the amount reduced to US$750 million.
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“Zambia will be paying its official creditors about US$750 million only over the next ten years, compared to about US$6.3 billion that was supposed to be re-paid in the same period, under the previous contractual arrangements,” Musokotwane said.
On the terms and conditions, he said: “We have agreed with the Official Creditors that we will not include domestic debt in the restructuring perimeter. This is essential to preserve financial stability and ensure a well- functioning domestic debt market,” he said.
He said other agreements were that interest rates would be set at a concessional rate during the next 14 years and would not exceed 2.5 percent thereafter under the baseline scenario.
Musokotwane said the agreement also included an adjustment mechanism that recognised the uncertainties that existed regarding Zambia’s future debt carrying capacity.
The adjustment mechanism provides for an accelerated repayment schedule and higher interest rates if Zambia’s debt carrying capacity improves from the current “weak” classification to “medium” classification.
“This assessment will be jointly undertaken by the IMF and the World Bank in 2026. Should the assessment results show that Zambian’s debt carrying capacity has improved from “weak” to “medium” capacity, the agreement provides that:
“Final maturity will be reduced by five years from 2043 to 2038 and Interest rates will be higher than the baseline scenario,” he said.
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