Inherited By Accumulated Debt And Empty State Treasury, Zambia's New President Is Ready To Pay Creditors

Inauguration of President Hakainde Hachilema. (Wikimedia Commons/ChaloNiZambia)

JAKARTA - Zambia's new President Hakainde Hichilema was surprised by the vacancy of the state treasury and concerned about the 'theft of state money', although he said he would continue to pay the country's creditors.

Citing the BBC  September 2, President Hichilema said he had inherited an 'empty' treasury, while a 'terrible' amount of money had been stolen.

"People are still trying to make last-minute movements of funds, which are not legitimate, which are not theirs", President Hakainde Hichilema criticized.

President Hichilema defeated his rival and incumbent Edgar Lungu in last month's presidential election. President Hichilema did not name the official. Meanwhile, Lungu had previously denied all wrongdoing. The BBC has approached his party for comment.

Lungu has ruled the copper-rich nation since 2015. He is widely praised for the smooth transition of power to Hichilema, who won the presidency after five failed attempts.

President Hichilema won the election on a promise to tackle corruption and to end the financial and economic crisis that has seen Zambia's debt swell.

For the first time since 1998, Zambia fell into recession last year. It also defaulted on debt payments. In an interview with the BBC, President Hichilema described his country's treasury as completely 'empty'.

"The hole is much bigger than we expected and the debt situation has not been fully disclosed by the previous government. Unfortunately, there is a lot of damage", said Hichilema.

He added that his government would show zero tolerance for corruption and would soon resolve what he called the illegal movement of funds.

"I don't want to get ahead of things, but what we took was terrible. You'd feel like no one could do something like that, but it's being done. People have done it. They're still trying to do something now".

President Hichilema also said, there are many people who do not work, but are paid by the government. The president also appointed economist and former International Monetary Fund (IMF) adviser Situmbeko Musokotwane as finance minister.

"Unless we do something about the budget, then the budget will be used mainly to pay salaries and also pay debts", said Musokotwane as quoted by Reuters.

Zambia owes foreign lenders about USD 12 billion, or about 8.6 billion pounds. It spends at least 30 percent of its income on interest payments, according to credit rating firm S&P Global.

Last year, Zambia missed interest payments, making it the first African country to default on loans during the pandemic. It is also facing difficulties repaying other loans. Meanwhile, the previous government had borrowed heavily, including from China, to build infrastructure.

Mr. Hichilema said the government was committed to restoring its credibility among lenders. For example, by holding talks with China which he believes in, understanding the difficult situation facing his government.

Last Thursday, President Hichilema posted on Twitter to reassure creditors that they would be paid. This announcement encourages the strengthening of government bonds, citing Bloomberg.

Zambia needs to secure a deal with the International Monetary Fund (IMF) that will form the basis for talks with other lenders, which range from state-owned lender China to holders of Eurobonds worth USD 3 billion. Meanwhile, Finance Minister Situmbeko Musokotwane said he was targeting a deal with the Washington-based lender in November.

To note, Zambian dollar bonds worth USD 1 billion maturing in 2024 rose 1.1 percent to 79.8 cents in London, after the announcement of this debt payment.

Creditors to Zambia need not worry about our current financial position. We will arrive at an amicable and mutually beneficial solution to our debt. We will engage transparently and in good faith. As the youth of Zambia would say, "Bally will pay."

— Hakainde Hichilema (@HHichilema) September 2, 2021