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The Zambian government has responded to criticism over the recent US$82 million payment made by ZESCO to China Exim Bank, asserting that the funds were paid in good faith and should not be perceived as an irregular transaction.
In a statement issued on Saturday, the Ministry of Finance and National Planning clarified that the US$82 million was a lawful amount owed by ZESCO.
The funds were part of a principal prepayment to China Exim Bank for financing the development of the 360 Megawatts (MW) Kariba North Bank Extension (KNBE) hydropower station, a major project in Zambia’s energy sector.
The Ministry stated that there should be no suggestion that the debt was not legitimately owed, nor that the payment was made with any ulterior motive.
“There should be no suggestion that this debt was not lawfully owed or that the payment was made other than in good faith. In addition, both the Government of Zambia and ZESCO have been fully transparent in respect of the payment,” the statement read.
The payment follows a financing agreement signed in November 2009 between ZESCO and China Exim Bank, where the bank agreed to provide US$320 million to fund part of the KNBE hydropower development, the ministry further claimed.
It said that the total project cost was estimated at US$420 million, and that the financing arrangement was secured by an account used to hold funds intended to service the loan. Over time, the funds in this account accumulated to US$82 million, which was later transferred as a prepayment to the bank, the ministry added.
The ministry noted that in December 2022, ZESCO’s Board of Directors approved the transfer of the accumulated US$82 million to China Exim Bank, a move intended to settle outstanding obligations under the financing arrangement and save on future interest rate costs.
The Ministry further explained that this payment occurred prior to Zambia’s agreement with the Official Creditor Committee (OCC) in June 2023, which was outlined in a Memorandum of Understanding (MoU) signed in October 2023.
The MoU, it said, is currently being formalized through bilateral agreements with creditors, including an agreement with the Republic of France, signed on December 8, 2024.
“In accordance with the terms of the MoU, the payment made by ZESCO should benefit from the agreed debt treatment, and this is the subject of ongoing discussions with the Official Creditor Committee.
“The payment was reflected in the Ministry of Finance and National Planning Quarterly Debt Statistical Bulletin for End March 2023,” the statement explained.
The Ministry emphasized that, to ensure transparency, the payment was reported to the Official Creditor Committee and was also highlighted in the International Monetary Fund (IMF) Second Review Staff Report of December 2023, demonstrating the government’s commitment to compliance with the debt restructuring process.
The payment aligns with the principle of “Comparability of Treatment” under the ongoing debt restructuring efforts, the ministry claimed.
ZESCO, as part of Zambia’s national power utility, owns and operates the KNBE power generating asset, which plays a vital role in the country’s energy supply.
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