Author: Socialist Party ZambiaThe Socialist Party is a political formation whose primary mandate is to promote and entrench socialist values in the Zambian society. Anchored on the principles of Justice, Equity and Peace (JEP), the Socialist Party shall transform the Zambian society from capitalism to socialism, building socialism in three key sectors: Education, Agriculture and Health.

Reality on Zambia’s total debt

Reality on Zambia’s total debt Featured

As at December 2022, Zambia’s public debt stood at $31.5 billion, excluding interest arrears on external debt and $32.8 billion including interest arrears of $1.3 billion since we have not been servicing the debt for close to 2 years.

Of the $32.8 billion total public debt, $14.23 billion represents local currency domestic debt broken down as follows:

  • Treasury Bills $2.21 billion
  • Government Bonds $9.40 billion
  • Domestic Arrears $2.45 billion
  • Others $0.8 billion
    (Source Ministry of Finance)

Government funds its day to day operations mostly from Treasury Bills and Government Bonds auctions which are now unfortunately failing as demonstrated in the last two Government Bond auctions.

It’s very important also to note that domestic arrears mostly relate to local contractors who have not been paid. This partly answers the issue of lack of liquidity in the market as local contractors are not being paid.

Our concern is that no one seems to be paying any attention to the the domestic debt issue. The risk on domestic debt default which will be catastrophic should it happen is not being addressed.

How would such an event arise?
If government fails to pay Treasury Bills and Government Bonds upon maturity a default can arise. Government uses part of the Treasury Bills and Government Bond auction proceeds to service the maturities. In the event that auction proceeds are not sufficient the treasury has to source funds elsewhere to service the maturities. Given the recent bond auction failures, treasury must be under stress to service these obligations and if the trend continues, then a domestic debt default could materialise.

We should mention that on the unsecured $2.45 billion Domestic Arrears, a default has already happened as contractors are not being paid.

We request the Ministry of Finance to provide us with a future outlook on how domestic debt is being managed. We need domestic debt reduction as much as we need external debt reduction, but this is being overlooked.

Least be reminded that when debt restructuring is concluded the interest arrears of $1.3 billion will need to be paid. Even if a haircut is achieved, a substantial sum still needs to be paid together with principal arrears.

The only way out of this dilemma is to increase domestic revenue mobilisation by abolishing mining tax exemptions, growing the domestic tax base, new industries coming on board, job creation, value addition and so on and so forth.

Again, the call for a comprehensive economic plan which addresses issues raised above is urgently needed to address these serious concerns. Instead we are embroiled in a not so helpful graphs and Catholics debate and overlooking real issues.

Fred M’membe
President of the Socialist Party

The Napsa dilemma

The Napsa dilemma Featured

Recent reports indicate that NAPSA, which traditionally has been a key participant in Government Bonds, has not participated in the last 2 or 3 Bank of Zambia Government Bond auctions. And NAPSA’s has greatly contributed to the recently heavily under subscribed auction.

How long is a piece of string? NAPSA, according to recent reports, has paid out K5.8 billion as part of Mr Hakainde Hichilema’s policy of partial pension withdrawals – of approximately $300 million using daily average exchange rates since this programme started.

We are also told that NAPSA expected a total partial pension payout totaling K11 billion to cover all potential partial pension draw downs. In effect, another K5.2 billion remains to be paid which is approximately $290 million. This translates to a cumulative payout of $590 million.

We are also told that NAPSA will provide debt financing to the tune of $300 million for the Lusaka/Ndola dual carriage.

In summary, NAPSA cash outflow on these two events in 2023 alone will be $890 million. This is a very huge amount! And we hope it will not create future funding constraints for NAPSA’s future operations.

As well meaning citizens, we strongly urge the Pensions and Insurance Authority to take keen interest in NAPSA’s future cash flow profiles for any potential risk of failure. We are not saying there will be a failure but just prudently ensuring that NAPSA can sustain these huge commitments.

Zambia defaulted on its Eurobond payments whose investors are mostly pensioners. And in our debt restructuring quest we are appealing for a haircut on the Eurobond. Meaning the pensioners, whose hard earned money was invested in these Eurobonds will lose out. The same can happen to our pensioners who are contributing to NAPSA on a monthly basis should things go wrong. So NAPSA needs to be extremely cautious on its investment profiling to safeguard the interest of our workers at a point of retiring.

Fred M’membe
President of the Socialist Party

Worrying ethnic and regional composition of  ACC

Worrying ethnic and regional composition of ACC Featured

The ethnic or regional composition of the officers of the Anti Corruption Commission (ACC) would’t make one under its investigation and prosecution comfortable if they hail from the so-called non Zambezi ethnicities or regions.

Currently the officers of the ACC are:

  • Board Chairperson – Musa Mwenye SC (Soli)
  • Director General – Tom Trevor Shamakamba (Lenje)
  • Deputy Director General – Vacant
  • Secretary to the Commission (Controlling Officer) Ivor Mukwanka (Ila and cousin to Tom Trevor Shamakamba through the mother)

And the officers heading the four core departments of ACC are:

  1. Director for Community Education – Mutinta Cheelo (Tonga)
  2. Director for Corruption Prevention – Glenda Mungalaba (Tonga)
  3. Director for Investigations – Raymond Chiboola (Tonga)

And under Investigations there’s the Special Intelligence Unit headed by
Desmond Chiboola, the young brother to Raymond Chiboola (Tonga)

  1. Director for Legal and Prosecutions – Stella Mulenga (Married to Mr. Mulenga who is Bemba).
  2. Finance – headed by Josphat Maiba (Tonga)
  3. HR headed by Rachel Chisanga Mtengo in acting capacity (Bisa)

Again, we turn to the more often quoted aphorism – the dictum laid down by Lord Hewart, the then Lord Chief Justice of England in the case of Rex v. Sussex Justices, [1924] 1 KB 256: “Justice must not only be done, but must also be seen to be done.”

This is certainly not a recipe for governing well or for justice and fairness. It undermines the very important work of the ACC and unnecessarily brings into question the fairness of its decisions and actions.

Fred M’membe

There’s need for a permanent solution to our debt crisis

There’s need for a permanent solution to our debt crisis Featured

The fifty-four sovereign African states are vastly different from each other, with distinct languages, histories, social and economic challenges, and possibilities. However, they are united by a political project that has been institutionalised through the African Union and its legal and organisational frameworks and by a neocolonial sovereign debt crisis.

Many countries across the Global South, particularly those in Africa, are currently in the throes of fiscal crises – largely the result of a perfect storm of global events. The COVID-19 pandemic triggered a global economic recession, which in turn impacted national economies. The ongoing conflict in Ukraine has disrupted vital global supply chains for food, fertilisers, and energy, thereby increasing many countries’ import bills and straining their budgets. The fiscal crisis is fundamentally a result of an unsustainable build-up of sovereign debt in the last decade, fuelled by cheap credit from Western economies and encouraged by international financial institutions, including the IMF. The COVID-19 pandemic and the conflict in Ukraine made what was already a tenuous situation worse.

Many poor countries are turning to the IMF as a credible source for finance in the present moment, largely egged on by claims that the IMF has reformed from its bad old ways and no longer demands crashing austerity as a conditionality. (‘Factsheet: IMF Conditionality’, International Monetary Fund, 22 February 2021, https://www.imf.org/en/About/Factsheets/Sheets/2016/08/02/21/28/IMF-Conditionality.)
Back in 2016, IMF economists published a mea culpa in which they (sort of) confessed the sins of the past and promised that they had turned over a new leaf. (Ostry, Loungani, and Furceri, ‘Neoliberalism: Oversold?’; Grieve Chelwa, ‘Is it Too Late Now to Say Sorry?’ Africa Is a Country, 29 May 2016, https://africasacountry.com/2016/05/is-it-too-late-to-say-sorry-imf-edition.). The evidence, however, suggests anything but a reformed IMF. A study from the International Labour Organisation that carefully tracked IMF conditionality in 2020, when many countries were grappling with health and financial burdens related to the COVID-19 pandemic, found that in most of the 148 countries examined, the IMF still required austerity as a condition for granting assistance. (Shahra Razavi et al., ‘Social Policy Advice to Countries from the International Monetary Fund during the COVID-19 Crisis: Continuity and Change’ (ILO Working Paper 42, International Labour Organisation, Geneva, 10 December 2021), https://www.ilo.org/global/publications/working-papers/WCMS_831490/lang–en/index.htm.).

The government of Zambia, the first country to default on its debt as a result of the pandemic, recently concluded a financing deal with the IMF with the signature condition of ‘a large, front-loaded, and sustained fiscal consolidation’, as the IMF put it –
in other words, austerity in black and white. (International Monetary Fund, ‘Zambia: Request for an Arrangement Under the Extended Credit Facility-Press Release; Staff Report; Staff Supplement; Staff Statement; and Statement by the Executive Director for Zambia’, IMF Country Report, no. 22/292 (September 2022), https://www.imf.org/en/Publications/CR/Issues/2022/09/06/Zambia-Request-for-an-Arrangement-Under-the-Extended-Credit-Facility-Press-Release-Staff-523196, 10.). The IMF wants the Zambian government to reduce its expenditure by billions of dollars over the next three years, which will be most acutely felt by the poor majority.(Grieve Chelwa, ‘IMF Deal: Cry, My Beloved Zambia’, Grieve Chelwa (blog), 7 September 2022). The government of
Sri Lanka, a country whose debt-fuelled boom came to a spectacular halt earlier this year, is also seeking IMF assistance, with early indications showing that the conditions attached to the deal will be as indefensible as the Zambian deal. (Peter Doyle, ‘The IMF’s Zambian and Sri Lankan Programs are Indefensible’, Peter Doyle (blog), 14 September 2022). The Ghanaian government too is desperately seeking another IMF deal, this after the last one was celebrated as the deal that would ‘restore the lustre to a rising star in Africa’. (‘Ghana to Conclude IMF Deal in March – Akufo-Addo Hopes’, Africanews, 7 February 2023, https://www.africanews.com/2023/02/07/ghana-to-conclude-imf-deal-in-march-akufo-addo-hopes/; ‘Ghana: IMF Program Helps Restore Luster to a Rising Star in Africa’, International Monetary Fund, May 2019, https://www.imf.org/en/Countries/GHA/ghana-lending-case-study.).

All this goes to show that the IMF cannot be the answer to the poorer nations’ economic challenges. Alongside its sister institutions, the IMF has provided ‘assistance’ to poor countries ever since its establishment in 1944, and yet many of these countries have remained poor in spite of this. The reason is that IMF assistance has never confronted the structural factors that have continued to consign many countries to the ranks of the poor. As diagnosed many years ago by scholars such as Walter Rodney and Andre Gunder Frank, development in the North is sustained by underdevelopment in the South. (Andre Gunder Frank, ‘The Development of Underdevelopment’, Monthly Review, 18 April 1966, https://monthlyreviewarchives.org/index.php/mr/article/view/MR-018-04-1966-08_3; Walter Rodney, How Europe Underdeveloped Africa (New York: Verso Books, 2018).). Seen this way, the IMF, as the archetypical Northern institution, is duty bound to maintain and entrench this status quo. How else does one explain the IMF’s solution to Zambia’s financial woes, for example? The IMF prescription ignores the fact that the country’s foreign-owned copper mines continue to generate billions for their overseas shareholders yet pay so little in taxes in a country where the estimated annual income taxes for one mining project alone could have amounted to nearly half the 2020 national water supply and sanitary budget.(Daniel Mulé and Mukupa Nsenduluka, ‘Potential Corporate Tax Avoidance in Zambia’s Mining Sector? Estimating Tax Revenue Gains from Addressing Profit Shifting or Revising Profit Allocation Rules. A Case Study of Glencore Mopani Copper Mines’, Oxfam Research Backgrounder Series, December 2021, https://www.oxfamamerica.org/explore/research-publications/potential-corporate-tax-avoidance-in-zambias-mining-sector/.).

A new kind of institutional apparatus that fosters cooperation, rather than competition, is required for Africa’s economic liberation and that of the Third World more generally. This would mean, for example, establishing currency arrangements that bypass the US dollar, which is a strong lever of IMF conditionality and a weapon of US foreign policy. These kinds of long overdue proposals are already underway in parts of the world, such as in Latin America, where Brazil’s President Luíz Inácio Lula da Silva (known as Lula) and Argentina’s President Alberto Fernández have proposed the establishment of a regional currency, the sur, that could be used to settle cross-border claims and store reserves.(Alberto Fernández and Luiz Inácio Lula da Silva, ‘Escriben Lula y Alberto Fernandez: Relanzamiento de la alianza estratégica entre Argentina y Brasil’ [Lula and Alberto Fernandez Write: Relaunching the Strategic Alliance Between Argentina and Brazil], Perfil, 21 January 2023, https://www.perfil.com/noticias/opinion/relanzamiento-de-la-alianza-estrategica-entre-argentina-y-brasil-por-alberto-fernandez-y-luiz-inacio-lula-da-silva.phtml.).

The hard work of figuring out the technical details related to the implementation of such regional currencies must begin in earnest.(Zinya Salfiti,
‘Nobel Economist Paul Krugman Slams Brazil and Argentina’s Joint Currency Plan, Saying “It’s a Terrible Idea”’,
Markets Insider, 30 January 2023,
https://markets.businessinsider.com/news/currencies/paul-krugman-brazil-argentina-south-american-euro-terrible-idea-2023-1.).
Africa, for example, needs a continental bank that is wholly owned by the people and will serve as a genuine tool to bolster sovereign industrial policies. The highly influential African Development Bank, with its significant Western shareholding, is not fit for purpose. (‘United States of America’, African Development Bank, accessed 13 February 2023, https://www.afdb.org/en/countries/non-regional-member-countries/united-states-of-america.).

Furthermore, there is an urgent need to restore and reinvigorate the capacity and autonomy of the African state to deliver on its development agenda. State capacity and state autonomy depend on the ability to adequately mobilise tax revenues, an area in which the African state has continued to underperform. The tax-to-GDP ratio, a measure of resource mobilisation, has remained incredibly low in Africa largely as a result of illicit financial flows that continue to spirit away billions of dollars from the continent every year.(African Tax Administration Forum (ATAF), African Union Commission (AUC), and Organisation for Economic Co-operation and Development (OECD), Revenue Statistics in Africa 2022 (Paris: OECD Publishing, Npvember 2022), https://www.oecd.org/tax/tax-policy/brochure-revenue-statistics-africa.pdf, 3; United Nations Conference on Trade and Development, Economic Development in Africa Report 2020. Tackling Illicit Financial Flows for Sustainable Development in Africa (Geneva: United Nations, 2022)).

As a consequence, the adequate delivery of the kind of social services that underpin people’s dignity (social security, health, education, etc.) continue to be hamstrung. (Isabel Ortiz et al., Fiscal Space for Social Protection. A Handbook for Assessing Financing Options (Geneva: International Labour Organisation, November 2019), https://www.ilo.org/secsoc/information-resources/publications-and-tools/books-and-reports/WCMS_727261/lang–en/index.htm.).

Further, the low tax-take in the poorer nations forces many governments to seek the easy way out by borrowing on the international capital markets, setting into motion dangerous debt dynamics that ultimately lead governments back into the unloving arms of the IMF. Notably, IMF conditionality rarely confronts the fact that state capacity and autonomy have been eroded in Africa largely as a result of the tax dodging practices of transnational corporations.

Just as problematic is the leading role that the IMF and its allied institutions have taken in the fight to save the planet from climate change. The IMF’s answer to climate change, which is influential given its inordinate role in the world, points to the private capitalist sector as the solution to the planet’s problems.( ‘COP27: IMF Calls for Climate-Smart Investment in Africa’, Africanews, 8 November 2022, https://www.africanews.com/2022/11/08/cop27-imf-calls-for-climate-smart-investment-in-africa/.).

All this is ironic given that the private capitalist sector’s insatiable appetite for profits at all costs has been responsible for the climate crisis.

The Third World must re-imagine a path out of our current crisis that doesn’t depend on the IMF, its allied institutions, and Western capital. The last seventy years or so have demonstrated that a reliance on these institutions only serves to trap the Third World in a perpetual state of underdevelopment. We need an emancipatory set of institutions and frameworks that will lead to the total independence of the Third World.

This is a task that our political leaders have to take on in a serious way with a very strong commitment to the economic, and thus total, emancipation of the African continent and the Third World more broadly.

We need to rebuild a present, and future, that centres the needs and aspirations of the majority.

Over the course of the past two decades, the stranglehold of Western-based bondholders and Western-controlled IFIs has weakened as other countries – mainly China – have emerged as the largest trading partners with African states and as the largest lenders to these states. Importantly, China’s public and private debt forgiveness during the pandemic has put pressure on IFIs to rethink the harshness of their debt repayment-austerity governance model.

The opening provided by Chinese funding is not an opportunity merely to borrow more: it is an opportunity for African states to construct genuine, and sovereign, development projects in this climate. These projects must seize multiple opportunities to raise funds, and the fragility of IMF power must also be utilised to advance fiscal and monetary policies that are built on an agenda committed to solving the problems of the African people, not facilitating the demands of wealthy bondholders and the Western states that back them. A number of mechanisms must be put on the table to avoid the IMF-driven debt-austerity trap.
There’s need to invalidate historical debts and rescue stolen assets:

Renegotiate all odious external debts of the poorer nations. An ‘odious debt’ is a debt incurred by a country without the assent of its people, such as during the phase of a military dictatorship.
Seize assets held in illicit tax havens, which as of 2010 total at least $32 trillion.(United Nations Conference on Trade and Development, Economic Development in Africa Report 2020. Tackling Illicit Financial Flows for Sustainable Development in Africa, 88.).

Build progressive tax codes:
Build the capacity of tax departments in each country, including digital tax infrastructure.
Implement taxes on wealth and inheritance.
Implement higher rates of taxation on income, such as capital gains, that is made through financial speculation by all non-bank corporate entities.
Discourage the base erosion and profit-shifting activities of multinational corporations and adopt a unitary approach to tax the share of global profits generated by subsidiaries of multinational corporations.
Reform domestic banking infrastructure:

Democratise the banking system by expanding the role and size of public banking and by implementing more regulations of and transparency for private banking.
Enforce ceilings as a percentage of liabilities on speculative banking activity by commercial banks.
Regulate the interest rates that banks charge for specific goods, such as housing loans.
Implement tight regulations for pension funds so that the savings of the people are not used recklessly for financial speculation and encourage the creation of public sector pension funds.
Build alternative funding sources to the IMF’s debt-austerity traps:

Set capital controls to prevent both foreign and domestic capital flight, policies that even the IMF argues are important.(International Monetary Fund, ‘Review of The Institutional View on The Liberalization and Management of Capital Flows’, IMF Policy Paper, 30 March 2022).
As highlighted earlier, capital flight is not only deleterious for local financial markets: it also robs the continent of the resources needed to drive an autonomous developmental agenda. With capital controls, governments will be able to devise effective monetary policies in an environment that would not be buffeted by shocks and unexpected fragilities. Capital controls must be implemented alongside a robust wealth tax collection system, pro-labour distribution policies, and the prevention of dollarisation.
Attract investment from institutions that do not enforce structural adjustment conditions, such as the Belt and Road Initiative and the BRICS’s New Development Bank. The absence of SAPs-like conditions on these emerging and alternative sources of capital explains their growing popularity in the South and Africa in particular.
Take advantage of local currency central bank swap arrangements (such as those offered by the People’s Bank of China).
Adopt ceilings on the interest rates that commercial and multilateral lenders charge developing countries.
Enhance regionalism:
Encourage the creation of regional trade and reconciliation mechanisms.

Fred M’membe
President of the Socialist Party

Our sovereign debt crisis

Our sovereign debt crisis Featured

In 2009, the Zambian-born economist Dambisa Moyo published the instant bestseller Dead Aid. (Dambisa Moyo, Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa (New York: Farrar, Straus, and Giroux, 2009)). Moyo’s main argument in the book was that there was little to show for the hundreds of billions of dollars in foreign aid that had been given ĺto the African continent since 1970. Rather than spurring development, she said, aid had financed grand-scale corruption and civil wars, which in turn thwarted economic growth on the continent. Moyo’s case against aid was not a new one. Her book’s arguments were inspired by the Hungarian-born British conservative economist Peter Bauer, in whose memory Moyo dedicated her book. Bauer made a career singling out foreign aid – not colonialism or neocolonialism – as the chief architect of Africa’s underdevelopment.(Peter Bauer, ‘The Case Against Foreign Aid, Intereconomics’, Verlag Weltarchiv 8, no. 5 (1973) 154–157).

What was new about Dead Aid was Moyo’s prescription? In a chapter titled ‘A Capital Solution’, Moyo called for the substitution of aid with private market debt. That is, she called on Western countries to significantly reduce their aid to Africa and at the same time called on African governments to make up for the shortfall by borrowing from private creditors and bondholders such as hedge funds, banks, and so on. For Moyo, this was an elegant solution to the problem of corruption, which had historically bedevilled the foreign aid industrial complex. Money sourced from private debt markets was unlikely to fuel corruption in Africa because, Moyo argued, private creditors were sophisticated enough to not invest in countries likely to engage in corruption. After all, corruption acted as a drag on economic growth, which in turn threatened the prospects of debt repayment. On the other hand, to access much-needed private credit, African governments would need to demonstrate to private creditors that they were committed to fighting corruption and to investing the proceeds in growth-enhancing activities. Moyo’s policy solution was, therefore, a supposed win-win for all concerned.

Moyo’s ‘capital solution’ provided the intellectual cover for the financialisation of capital flows to Africa through the issuance of so-called Eurobonds (i.e., the issuance of bonds in US dollars and Euros), whose meteoric rise would engulf the continent in a new debt crisis by 2020. Ghana’s first issuance of a Eurobond in 2007 was a turning point for the continent. The country’s debut bond of $750 million was issued to much fanfare and was highly sought after by financial investors in New York and London. (Reuters, ‘Huge Demand for Ghana’s Debut Eurobond’, Ghana Web, 27 September 2007, https://www.ghanaweb.com/GhanaHomePage/business/artikel.php?ID=131428.). In a quest to satisfy investors’ appetites, Ghana followed up by issuing two additional Eurobonds totalling $2 billion in 2013 and 2014. Other countries in Africa soon followed suit. (Vivian Kai Mensah, ‘Ghana Issues Third Eurobond’, 11 September 2014, Citi 97.3 FM, https://citifmonline.com/2014/09/ghana-issues-third-eurobond/#sthash.Ry1XkD86.dpbs.).

In 2011, Zambia obtained its first sovereign credit rating (a credit score of sorts) from the ratings agency Fitch. Shortly thereafter, the country issued two Eurobonds in quick succession in 2012 and 2014, a scenario that increased Zambia’s external debt by an incredible 300% in three years. (Grieve Chelwa, ‘It’s Time to Treat Commodity-Backed Loans to African Countries the Same Way We Treat Equity’, Quartz, 2 June, 2015, https://qz.com/africa/417167/its-time-to-treat-commodity-backed-loans-to-african-countries-the-same-way-we-treat-equity; Grieve Chelwa, ‘The “Truth” about Zambia’s Debt’, Grieve Chelwa (blog), 15 October 2020, http://gchelwa.blogspot.com/2020/10/the-truth-about-zambias-debt.html.). Kenya likewise jumped on the bandwagon, issuing three Eurobonds between 2014 and 2019 that totalled around $5.5 billion.(Paul Wafula, ‘Kenya: Eurobond Dossier Reveals Kenya’s Deep Economic Ties to China, IMF’, AllAfrica, 17 June 2021, https://allafrica.com/stories/202106170380.html.).

Eurobond issuance on the continent grew at an incredible pace in the second decade of the twenty-first century: by 2020, twenty-one African countries had issued Eurobonds (several, in many cases). According to the World Bank’s International Debt Statistics handbook, the stock of Eurobond debt for sub-Saharan Africa grew from about $32 billon in 2010 to $135 billon in 2020, a 322% rate of increase. (World Bank, International Debt Statistics 2022 (Washington, DC: World Bank, 2022), https://openknowledge.worldbank.org/bitstream/handle/10986/36289/9781464818004.pdf?sequence=4&isAllowed=y)

In other words, the stock of Eurobond debt had more than tripled in just ten years.

The rate of increase in the stock of Eurobond debt between 2010 and 2020 far outstripped other sources of foreign currency debt in Africa. For example, multilateral debt from the World Bank, IMF, African Development Bank, and other institutions increased by about 144% over the same period, a rate that is less than half that of the increase in Eurobond debt. Similarly, bilateral debt from governments in countries such as China, France, the US, and the UK to governments in Africa also increased at a rate of 145%, which was also less than half the rate of increase in Eurobond debt. (World Bank, International Debt Statistics 2022 (Washington, DC: World Bank, 2022), https://openknowledge.worldbank.org/bitstream/handle/10986/36289/9781464818004.pdf?sequence=4isAllowed=y.).

This last point on bilateral debt is worth highlighting given the argument on ‘debt trap diplomacy’ that has become commonplace with respect to debt from China. The argument alleges that China is using debt to trap Africa in a perpetual cycle of indebtedness and servitude. However, the facts present a different picture. Though World Bank’s International Debt Statistics handbook does not provide a country-by-country breakdown of bilateral debt to Africa that would allow us to isolate the Chinese component, it shows that by 2020 Africa’s total external debt owed to bilateral creditors (i.e., countries) stood at $115 billion, compared Eurobond debt of $135 billion. Further, the figure for bilateral debt provided by the World Bank is for all bilateral creditors, implying that Eurobond debt outstripped all debt from bilateral creditors, which includes China. A careful analysis from Debt Justice shows that African debt to China was $83 billion in 2020, a number smaller than the $135 billon owed to private bondholders. (The Growing Debt Crisis in Lower Income Countries and Cuts in Public Spending’, Debt Justice, July 2022, https://debtjustice.org.uk/wp-content/uploads/2022/07/Who-African-governments-debt-is-owed-to_Media-Briefing_07.22.pdf, 2.). Figures on Chinese loans and Africa’s debt produced by researchers working at the China Africa Research Initiative (CARI) at Johns Hopkins University in the United States are often cited in support of the debt trap diplomacy argument (despite their own researchers having published articles debunking the Chinese debt trap narrative). (Deborah Brautigam and Meg Rithmire, ‘The Chinese “Debt Trap” Is a Myth’, The Atlantic, 6 February 2021, https://www.theatlantic.com/international/archive/2021/02/china-debt-trap-diplomacy/617953/.). However, they are not very useful in this particular case because, according to CARI itself, its database ‘does not track [debt] disbursements and repayments’.(‘Loan Data’, China Africa Research Initiative, Johns Hopkins University’s School of Advanced International Studies, accessed 13 February 2023, http://www.sais-cari.org/data.). I36 Edwin Mutai, ‘Ouko Says Eurobond Billions Still a Mystery’, Business Daily Africa, 23 January 2018, https://www.businessdailyafrica.com/bd/economy/ouko-says-eurobond-billions-still-a-mystery–2186608; Steven Mvula and Frank Ching’ambu, ‘Where Did the Eurobond Given to ZR Go?’, Frontlines Zambia, 4 August 2022, https://frontlineszambia.com/archives/26311).
In other words, CARI only reports on newspaper announcements of loan contraction but does not track to see if the contracted loan left China and, if it did, if the recipient government in Africa subsequently paid it off or paid off portions of it. Therefore, CARI figures can be misrepresented in ways that vastly exaggerate the true stock of Chinese debt to Africa.

This goes to show that the current sovereign debt crisis currently engulfing the African continent is largely the creation of private creditors via the Eurobond craze that possessed and took hold of the continent in the second decade of the twenty-first century, helped along by the intellectual justifications of Dambisa Moyo and others. Eurobonds did not fix the problem of corruption that was said to be endemic with foreign aid, as Moyo argued they would. For example, hundreds of millions of dollars of Kenya’s first Eurobond issuance are said to have gone ‘missing’. In Zambia, questions have been raised about where the Eurobond money went.(Edwin Mutai, ‘Ouko Says Eurobond Billions Still a Mystery’, Business Daily Africa, 23 January 2018, https://www.businessdailyafrica.com/bd/economy/ouko-says-eurobond-billions-still-a-mystery–2186608; Steven Mvula and Frank Ching’ambu, ‘Where Did the Eurobond Given to ZR Go?’, Frontlines Zambia, 4 August 2022, https://frontlineszambia.com/archives/26311.).
In Mozambique, loans and bonds were illegally withdrawn and misused by state-owned enterprises (known as the Tuna Bond Scandal). As these cases illustrate, Western private bankers and creditors have facilitated this type of theft (‘Mozambique and the “Tuna Bond” Scandal’, Spotlight on Corruption, 9 February 2021, ; Lily Kuo, ‘Kenya’s Ex-PM Accuses US Banks of Helping the Government Steal $1 Billion from the Country’s First Eurobond’, Quartz, 4 January 2016, https://qz.com/africa/594324/kenyas-ex-pm-accuses-us-banks-of-helping-the-government-steal-1-billion-from-the-countrys-first-eurobond.).

Finally, analysing the sources of debt in Africa casts doubts on current multilateral initiatives aimed at resolving Africa’s sovereign debt crisis. One example is the Debt Service Suspension Initiative (DSSI), launched by the G20 in May 2020, soon after the COVID-19 pandemic began to send shockwaves across the globe, to encourage bilateral and multilateral creditors to suspend interest payments on debt owed by poorer nations, including those in Africa, for a year. The DSSI was hardly successful, as many creditors – with the exception of a few, such as China – refused to suspend interest payments.(Alicia García-Herrero, Suman Bery, and Pauline Weil, ‘How Is the G20 Tackling Debt Problems of the Poorest Countries?’, Bruegel (blog), 25 February 2021,https://www.bruegel.org/blog-post/how-g20-tackling-debt-problems-poorest-countries; ‘China Says Has Given $2.1 Billion of Debt Relief to Poor Countries’, Reuters, 20 November 2020, https://www.reuters.com/article/us-china-debt-g20-idUSKBN28009A.).
In addition, many analysts remarked that the DSSI was not fit for purpose, since it only applied to official debt (multilateral and bilateral), while the sovereign debt crisis was largely fuelled by a private bond crisis as shown above.

As the DSSI expired in June 2021 and the sovereign debt crisis got worse, the G20 launched the Common Framework for Debt Treatments, which would become the guiding mechanism for debt restructuring after the initial years of the pandemic. (‘The Common Framework for Debt Treatment beyond the DSSI’, Ministry of Economy and Finance of the Italian Government, accessed 13 February 2023, https://www.mef.gov.it/en/G20-Italy/common-framework.html). Unfortunately, it is bedevilled by many of the same problems that afflicted the DSSI. First, the Common Framework only has mechanisms for resolving official credit. But, as the above analysis shows, a substantial portion (and by far the largest single source) of Africa’s sovereign debt is owed to private bondholders and creditors. Their absence largely confines debt restructuring discussions to the theoretical sphere, with little practical value. Second, the Common Framework lays the ground for an official creditor committee, which in the case of Zambia is co-chaired by France and China. France is seen to represent the old Paris Club of creditor countries, which together make up a sizeable portion of the official credit given to Zambia. China is a co-chair given its emergence as an important source of credit to Africa, and Zambia in particular. However, the structure and governance of Zambia’s creditor committee with the two co-chairs has opened the country to geopolitical manoeuvrings and, in the process, largely paralysed the prospects for genuine debt restructuring anytime soon.

Fred M’membe
President of the Socialist Party