Zambia’s Chinese debt nearly twice official estimate, study finds

Former Zambian President Edgar Lungu, his wife and Chinese President Xi and his wife

LUSAKA (Reuters) – Zambia’s debt to Chinese public and private lenders is $6.6 billion, almost double the amount disclosed by the previous Zambian government, an analysis of loan data by the China Africa Research Initiative (CARI) has estimated.

Zambia became Africa’s first coronavirus-era sovereign default last November and its ongoing debt restructuring has become a test case of Western multilateral efforts for countries to fully disclose their borrowings.

Zambia’s previous government led by Edgar Lungu said its Chinese debt stood at $3.4 billion. But the estimate published by CARI on Tuesday chimes with recent comments from newly-elected President Hakainde Hichilema, who took office last month, that the debt load is likely higher.

The country’s international creditors, which the government is in talks with, have complained that the lack of detail on Zambia’s China loans – which carry specific non-disclosure terms – has hindered the debt restructuring process.

“Given the complicated situation… reaching consensus on burden-sharing is likely to prove exceptionally difficult,” the CARI researchers who made the new estimate, Deborah Brautigam and Yinxuan Wang, wrote.

The new $6.6 billion figure is based on Chinese loan data collected by CARI at the Johns Hopkins University School of Advanced International Studies.

It is likely to continue to grow as it does not include penalties or interest arrears that continue to build up.

China is Africa’s largest creditor.

It is part of the World Bank and International Monetary Fund-supported Debt Service Suspension Initiative which has temporarily frozen debt payments to dozens of the world’s poorest countries, but it is being urged to do more in terms of disclosure.

Tuesday’s study estimated that $7.77 billion in loans to Zambia and its state-owned enterprises were disbursed by 18 major and minor Chinese banks or funds from 2000 to August 2021.

Of those, Zambia has repaid at least $1.2 billion.

Their estimate does not change Zambia’s total debt load of $14.3 billion, the researchers said, but shows that the Lungu government “was not transparent about the heavy weight of Chinese financiers among its many external creditors”.

Bwalya Ngandu, finance minister under Lungu, has said it is not true that Zambia’s debt numbers were understated.

“We have never hidden any debt,” he said in a statement earlier this month.

The researchers found six instances where Chinese lenders cancelled debt owed by Zambia, for a total of $392 million.