Policy body says successful debt repayment dependent on responsible borrowing practices

Centre for Trade Policy and Development (CTPD) has said responsible borrowing practices will have to be employed by government whilst enhancing domestic resource mobilisation to successfully pay back its debt that has been restructured.

CTPD Executive Director, Isaac Mwaipopo, in response to a press query said this would have to be backed by demonstration by government’s political will.

Last month, Zambia and its government creditors, including China reached a deal to restructure US$6.3 billion in loans.

According to Mwaipopo, Zambia’s debt restructuring agreement did not in any way imply debt cancellation but a postponement of debt service obligations by means of a haircut and maturity extensions.

This, he explained, then meant that Zambia would need to pay back its debt arrears in the near future.

Read more: Zambia’s debt restructuring leaves many countries unsure, nervous of G20 Common Framework

“Hence, Zambia can only successfully pay back its debt if government demonstrates political will and concerted efforts in simultaneously employing responsible borrowing practices whilst enhancing domestic resource mobilisation.

“Additionally, the reduced debt service obligations resulting from the restructuring agreement also presents an opportunity for the country to grow the economy by redirecting resources which would have potentially been used for debt servicing to productive sectors,” Mwaipopo said.

He also said the recently granted debt restructuring agreement for Zambia formed the fundamental principles by which Zambia’s debt could be restructured.

Mwaipopo said this agreement also provided reassurances to the external committee especially creditors and investors that the country was dedicated to deal with its debt challenge.

This, according to him, may see improved investor confidence.

“However, seeing that this is only an agreement on the principles of debt treatment implies that more work lies ahead as the country engages individual creditors on bilateral terms leading to the signing of the Memorandum of Understanding.

“More importantly, engaging the commercial creditors whose debt is often challenging to restructure. For other African countries, this agreement provides hope of the possibilities of debt treatment under the G20 Common Framework,” he said.

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