…UPND resolving PF’s fuel supply debt mountain for subsidized petroleum and power imports debt
The government has dedicated K15.2 billion (36.3%) of the just-presented K41.9 billion 2024 supplementary budget to dismantling the accrued debt for fuel contracted by the Patriotic Front administration.
“As we are all aware, fuel was heavily subsidized before 2022, and suppliers were not fully paid by the Government then. We are now left with the obligation of resolving this problem if we are to make meaningful traction in ridding our citizens of this liability burden,” said Finance and National Planning Minister Dr. Situmbeko Musokotwane.
He said the government would replace the expensive late payment interest on fuel arrears, of around 18% per annum, with cheaper debt.
Meanwhile, external debt servicing obligations will account for K14.6 billion (34.8%) of the supplementary expenditure, which the Finance Minister presented to Parliament on Friday.
This means that debt servicing will account for 71% of the government’s additional expenditure, which has been necessitated by the severe drought experienced in 2024. This repeats the pattern of expenditure for May when internal and external debt servicing comprised the two largest single expenditure items and accounted for 77.8% of the total spent.
Musokotwane explained that this was required expenditure, given the debt restructuring agreements reached between the government and its creditors.
He described the debt restructuring milestones reached as pivotal to Zambia’s development. “In particular, resumption of external debt servicing with our various creditors will remove the debt defaulter tag from our country and facilitate the inflow of both investments and private sector development.”
Breaking down the debt obligations and the relief associated with the restructured agreements, Musokotwane explained that Zambia should have paid US$6.3 billion between 2023 and 2031 but would now pay a significantly reduced US$750 million and US$3 billion, respectively, in the base and medium case scenarios in the same period.
“…for the Eurobonds, the government is expected to pay about US$1.6 billion under the base case scenario and about US$1.8 billion in the medium case scenario between 2024 and 2031. The amounts payable in both cases are much lower than the US$3.8 billion, which was payable by 2027 if the debt had not been restructured. In addition, accrued interest arrears reaching up to US$800 million have been waived in the concluded deal.”
Also provided for in the proposed additional budget is a US$30 million advance to ZESCO Limited for power imports from Mozambique because of unsettled bills from as far back as the power crises of 2015 to 2018 when Zambia imported power from there.
Musokotwane stated that the supplementary budget will be funded through savings from existing allocations to various government institutions and departments, whose expenditures on workshops, local and international travel, and other general government operations have been cut.
“For these cuts, I request for everyone’s understanding, especially in the public sector. Truly speaking, we have received tremendous support from cooperating partners. It is imperative, however, that the Zambian government and people take the lead in making sacrifices in order to feed our compatriots so that the support from donors merely complements our own efforts,” Musokotwane implored.
Cooperating partners will give a further K4.3 billion to address the drought situation, while K3.8 billion is from additional revenues realized in the year, but which were not part of the 2024 revenue estimates.
“This includes dividends posted by the Bank of Zambia, which were more than earlier projected, as well as some monies forfeited to the state from individuals and institutions who are believed to have irregularly acquired it. We are now putting this money for the use of the public, who are the true owners,” Musokotwane stated.
He said the balance of K16.6 billion will come from additional concessional financing from domestic and external sources, including US$194.5 million of IMF drought-response support.
