September 7, 2007

Domestic debt is being restructured, announces Finance Minister

Zambia has started to reduce short-dated Treasury Bills and is issuing long-term instruments as it strives to cut its huge domestic debt, Finance Minister Ng'andu Magande has announced. Magande said in a statement that the 8.9 trillion Zambian kwacha domestic debt would be reduced by eliminating outstanding debt that had built up over a number of years. He added that the government would maintain its debt loads at sustainable levels by "observing a strict reduction strategy for domestic borrowing and curtailing the accumulation of new debt while clearing existing arrears in a phased approach".
In 2007 Zambia has received $77.1 million in new loans after multilateral lenders and western donors cancelled the bulk of the country's debt in 2006 as part of a global plan to reduce debts owed by some of the world's poorest nations. The International Monetary Fund (IMF), World Bank, African Development Bank (AfDB) and Western donors provided Zambia with massive debt relief in 2006. Zambia's strategy for managing debt is to regularly allocate funds in the budget to the reduction of outstanding debt through the Medium Term Expenditure Framework (MTEF), a government economic management strategy for the 2007/09 period.
"In the case of government securities, the strategy in the medium-term is to manage domestic debt through prudent cost and risk management rather than reduce it," Magande said. "In managing the risks, the government is restructuring the domestic debt by reducing short-dated instruments, such as 90-day, 180-day, 270-day Treasury Bills and increasing long-dated instruments such as 7-year, 10-year and 15-year bonds," he added. Commercial bank officials say the government has stopped issuing 28-day Treasury Bills. The concessionary loans from the AfDB and World Bank have terms of repayment of 40 years after a 10-year grace period and a commitment fee of 0.05 percent per annum, Magande further said.
The loans received this year shall help fund road rehabilitation and maintenance, poverty reduction programmes and improvement of water supply and sanitation. Zambia's external debt stood at $957.4 million at the end of 2006. A total $562.4 million of that amount was owed to multilateral creditors, while $395 million was owed to bilateral creditors. (The Times of Zambia, Ndola)

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