Zambia on road to debt restructuring; hires advisors - Credit Report

11 August 2020

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For over a decade, Zambia has focused on stepping up public investment to address its infrastructure issues. However, this has strained the fiscal budget and widened the deficit to 8.2% in FY19 (FY18: 7.6%, FY10: 3.0%), largely on account of accelerated interest payments. In December 2019, the country failed to repay loans borrowed from AfDB and was thus placed under sanctions. The sanction was lifted, after Zambia repaid the outstanding due. To address the distress, the government hired advisors in May 2020, expecting to restructure debt and strengthen liquidity. In FY19, Zambia reported GDP growth of 1.5%, a significant fall from 4% in FY18 (FY17: 3.5%). In the wake of the coronavirus crisis, the IMF revised its estimates on Zambia’s GDP, which is now expected to fall by 4.9% in FY20 against c.3% growth expected previously.