Zambia’s New President Has a Unique Opportunity To Reset Ties With China

Hakainde Hichilema’s decisive election victory, which made him the eighth president of Zambia in the post-colonial era, is a gust of good news that Africa and the world badly needed. His win is an endorsement of democracy in a region where we’ve seen so many other countries move depressingly in the other direction.And he did it with class.  Hichilema didn’t stoop to populist xenophobic messaging and hateful rhetoric like presidential candidates in the U.S., Brazil, and France among other places. He ran a mostly positive campaign that inspired young voters to give him a mandate for change they so desperately want and so badly need.To stop the country from sinking deeper into financial despair, the President-elect will have to use some of that hard-earned political capital to reset relations with China, Zambia’s most important bilateral creditor and one of its largest trading partners. It’s not going to be easy but he can’t fix the economy without changing the terms of engagement with creditors in Beijing.With that in mind, here are five measures the incoming Hichilema administration should implement within the first three months of moving into the State House in Lusaka:BUY SOME TIME: The first thing Hichilema needs to do is to buy some time by insisting that Chinese creditors give him the same kind of three-year debt deferral deal they did in Angola. With the Delta variant rapidly spreading and the global economy showing new signs of weakness, the President-elect will need to reduce debt servicing costs in the short term and shore up the country’s balance sheet. Also, by negotiating a debt deferral deal he can avoid the mess now confronting Kenya, where the China Exim Bank is forcing the government to repay its railway loans even though Nairobi doesn’t want to and can’t afford it.END THE SECRECY: The President-elect should open discussions with the Speaker of the National Assembly Patrick Matibini to pass a series of laws that will require all government loan contracts to be publicly available. The new law should be retroactive to include all previous loan contracts, so the IMF, bondholders, and, most importantly, constituents have a full understanding of the true extent of Zambia’s financial obligations. At present, these remain a mystery. Not only will this help to bring an end to Zambia’s current stalemate with international creditors, but it will also set a bold example for developing countries around the world on how to properly deal with international creditors. Because these will be national laws, China will have no choice but to accept the outcome so as to remain consistent with its longstanding non-interference doctrine.BETTER DEBT MANAGEMENT: The lack of transparency related to Zambian debt holdings is a key reason why the government often pays higher risk premiums on its bonds than other governments. With the creation of a newly-empowered Debt Management Office (DMO) modeled on Nigeria’s, Hichilema will not only reduce the country’s borrowing costs but also go a long way to repair relations with creditors and constituents who are all highly distrustful of the Finance Ministry’s debt reporting. The new DMO should, as Nigeria’s does, publish regular updates on Chinese debt holdings, for example, that explain in plain language how much Zambia has borrowed, what it was spent on, and who is owed what.CONVENE A ZAMBIAN DEBT CONFERENCE: Distrust among Zambia’s major creditors is one of the key problems holding back a comprehensive resolution to the country’s worsening financial crisis. Although China has publicly committed itself to supporting the principle of “equal treatment,” bondholders and even some at the IMF in Washington remain concerned that any debt relief on their part will simply be used to repay China behind their backs. By organizing a conference that brings together private creditors, Chinese banks, and the major multilateral development finance institutions, Hichilema will work to relieve the current distrust gap among creditors in the hope of building a credible repayment schedule where every party feels assured.USE THE CURRENT WINDFALL WISELY: Copper prices are at multiweekhighs and are forecast to remain strong through the end of the year. But Hichilemaneeds to learn the lesson of previous Zambian governments who frittered away the proceeds from strong commodity prices by not investing in education, public health, infrastructure, and debt reduction. So long as the Chinese economy holds up, and that’s not certain right now, strong demand for copper and other Zambian exports will generate the cash flow he’ll need while he negotiates the rest of his agenda.I don’t pretend that any of this is going to be easy and if he only achieves one or two of the things on this list, that’s at least some progress. But he’s got to do something because if he just continues with business as usual, he’ll likely face the same fate as his predecessor and become a one-term president.

Source: Chinaafricaproject.com