Zambia’s new president tackles debt mountain and empty treasury

4 years in the past Hakainde Hichilema was being held in a Zambian prison accused of treason. Now he’s aiming to save lots of the southern African nation from monetary break.

Practically 100 days into his presidency after he beat the person who put him in jail, former chief Edgar Lungu, in a landslide election victory, Hichilema faces the duty of turning around the resource-rich however near-bankrupt nation. The president goals to scale back corruption and improve manufacturing of copper in a drive to win over bond buyers and the IMF.

“For those who noticed what I’m seeing now, you’ll fall off your chair,” stated Hichilema in an interview with the Monetary Occasions in London on his means again from the COP26 climate talks, referring to what he alleged was rampant corruption within the earlier administration. “The treasury we inherited was utterly empty.”

Final yr, Zambia, Africa’s second-biggest copper producer, turned the continent’s first country to default since the start of Covid-19 after it skipped funds on US greenback eurobonds.

In a foreign country’s almost $15bn debt, together with arrears, Hichilema’s authorities lately revealed that the share owed to Chinese creditors was $6bn, about double what was beforehand recognized. That has raised considerations that there could possibly be extra hidden debt and dangers complicating negotiations with collectors and the IMF. The brand new authorities needs to signal a bailout with the fund by year-end.

Billions of {dollars} had been stolen by way of extravagant spending and kickbacks on building tasks, in addition to corrupt gas and fertiliser subsidy schemes, he stated — accusations his predecessor denies. Hichilema’s authorities was searching for to get well stolen belongings and clamp down on procurement practices that had previously vastly inflated costs from roadworks to stationery provides, he stated.

The Mopani copper mine.
The Mopani copper mine. Zambia introduced a majority stake within the mine from Glencore this yr © Anders Pettersson/Getty

Personal collectors have sought transparency on the debt earlier than they renegotiate funds; that they had beforehand expressed concern that any concessions they make could possibly be used to pay Chinese language lenders.

Hichilema stated refusing to barter was now not tenable after the change of presidency. Personal collectors, he stated, “don’t have a selection. You can not boycott and count on an answer particularly in case your tooth have been already within the beef”, he added, referring to collectors who have been keen to fund the Lungu administration. “You lent to a rustic that was distressed.”

Debt restructuring talks had already begun with each personal collectors and China, he stated after assembly eurobond collectors in London. “We’ll deal with debt stockholders equitably to keep away from cross-subsidisation,” he added, an assurance that cash given up by one set of collectors wouldn’t be used to pay one other.

Money is tight after the Lungu administration spent closely on subsidies within the run-up to August’s election, growing the fiscal deficit to greater than 10 per cent of gross home product. Hichilema offered a funds final month that’s seen as the inspiration for an IMF deal.

The funds goals to chop the deficit steeply to six.7 per cent this yr, finally shifting into surpluses. “That is a part of the prudence measures we want ourselves. We don’t want the IMF to inform us to save cash,” he stated.

A part of his answer is to devolve spending to native authorities. “We’re taking cash from a small clique of thieves in [the capital] Lusaka and sending it to the native communities,” he stated. “Devolution, decentralisation has been talked about since independence. No authorities had the braveness to do it, however we’re doing it.”

Jimmy Maliseni of the Alliance for Group Motion, an anti-corruption watchdog, stated he agreed with devolution in precept. “Our concern is extra about how it’s activated,” he stated.

Hichilema, whose victory in August got here after 5 unsuccessful runs on the presidency, was charged with treason in 2017 after his motorcade overtook Lungu’s presidential convoy on the best way to a ceremony. Safety forces violently raided Hichilema’s home and imprisoned him for greater than two months throughout which, he alleges, there was an try on his life.

His fiscal juggling act has been eased by a better copper worth, which has risen to a 10-year excessive and recently breached $10,000 a tonne. The federal government is focusing on GDP development of three.5 per cent in 2021 after a contraction of about 3 per cent in 2020.

Hichilema has resisted requires a windfall tax on mining. An formidable goal of almost quadrupling annual copper manufacturing from the present 880,000 tonnes relied on reassuring buyers that Zambia offered each a pretty and reliable enterprise atmosphere, he stated.

However Hichilema is below stress to extract extra income from the sector and to open it as much as better alternatives for Zambians, stated Trevor Simumba, an economist.

“The federal government must also have emphasised to the [mining groups] that they should contribute rather more, particularly with the value of copper the place it’s. The mines are making windfall earnings, and it might solely be truthful for Zambia to profit,” Simumba stated.

Regardless of his private historical past with the earlier administration, Hichilema stated he wouldn’t pursue a vendetta. “We need to restore the rule of legislation. However we don’t need to perpetuate the unhealthy behaviour of our predecessor,” he stated. “We don’t need vengeance.”

This didn’t imply that members of the Lungu administration, together with the previous president, have been immune from potential prosecution, Hichilema added.

“We should not mistake that with impunity. We’ve zero tolerance for corruption,” he stated. “Nobody ought to mistake what we’re saying. The place there’s want for somebody to be prosecuted, they are going to be prosecuted.”

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