Africa-Press – Zambia. The Zambian economy continues to perform beyond expectations as the world grapples with the combined effects the Covid pandemic, Russia’s invasion of Ukraine and the general meltdown of global economic activity.
The United States, the United Kingdom and other G7 most developed countries are battling historically high rates of inflation and astronomical fuel and food prices forcing respective Central banks to continuously raise lending rates to push up the cost of borrowing in order to reign in money supply in bid to fight inflation.
In the UK the cost of living crisis with particular emphasis on energy costs, in part, has created political instability and economic uncertainty seldom seen in a first world country. As a result, the British have changed governments three times since September. Countries like Turkey and Lebanon have inflation rates of over 80%.
As for Africa, Ghana’s currency, the CEDI has lost over 60% of its value against the US dollar since January causing havoc in that highly import dependent country. Two weeks ago 80 members of Parliament from the ruling party demanded the sacking of the Finance Minister for ineptitude and incompetence as skyrocketing prices made lives of ordinary Ghanaians unbearable.
However, it is not all doom and gloom. In Zambia the year old government of the United Party for National Development (UPND) has under extremely difficult circumstances managed to stabilize an economy and a county, which was severely distressed.
First some background. After Zambia held tripartite polls in August 2021, the country ushered in a new government led by president Hakainde Hichilema dubbed the new dawn administration, ending ten years of inept Patriotic Front government that had left the country debt ridden, bankrupt, lawless and polarized.
As a result, the United Party for National Development inherited a country gripped by serious economic challenges which led to people going through severe hardships. Putting food on the table had become a nightmare and the economic problems were exacerbated by the effects of the Corona Virus, which limited economic activity. The war in Ukraine further caused economic upheaval as pries of fuel and food soared owing to supply chain constraints resulting from the conflict.
Against this back drop the new administration has managed to control inflation, reduce and stabilize the Kwacha exchange rate against major convertible currencies, decentralized resource allocation through enhanced Constituency Development Fund, created employment in education and heath, among others.
Additionally, increased Foreign Direct Investment due to restored investor confidence has seen leading Canadian based miner FQM investing over US$1.2 billion in existing mining projects as well as a US$250 million investment in setting up the biggest Nickel mine in Africa.
Other notable successes of the past one year include, but are not limited to, making the Zambian kwacha the world’s second-best performing currency and Africa’s 6th most powerful currency. Perhaps the most notable achievement as been in the area of unlocking the country’s unsustainable foreign debt burden.
From inception the new government went all out to negotiate with creditor nations and institutions to restructure the country’s debt which was in excess of Us$28 billion inclusive government guarantees for projects such as power generation. This was cardinal as the country had defaulted on Euro Bond payments in Novmber2020, making it a pariah in the international world to high finance. Without structured relief from creditors all efforts at economic recovery and restoration would have come to naught.
With good governance, transparency and accountability as Zambia’s guiding principles, the IMF soon agreed to a staff level agreement which was quickly followed by a US$1.3 billion bail out package to give the country relief in turbulent economic waters. The World Bank soon followed suit granting Zambia concessional long-term loans for improvement and enhancement of several economic sub sectors such as agriculture, tourism and manufacturing for job creation and poverty alleviation.
The opaque world of Chinese debt was, however , a different matter. The Chinese owed in excess of US$6.7 billion contracted by the previous government without regard to repayment capacity or modalities, are, as a rule secretive in their lending transactions and have historically, never been part of any debt restructuring or forgiveness framework.
To the surprise and then delight of Chinese debtor nations, the Zambians in April managed to get China to co chair its debt committee with France. Headway has been made with China Exim bank now heading negotiations to restructure all of Zambia’s China debt in its entirety.
Dr. Chris Patrick’s is Associate Professor in the Department of Political Sciences and Director of the Centre for Mediation in Africa. He also publishes on multilingualism in higher education and journalism studies. He is a former award-winning journalist.
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