China blamed for Zambia’s debt, but the West’s banks and agencies enabled it

On 13 November, Zambia became the first African nation in the Covid era to default on its external debt payments. The default was triggered by the inability of the government to arrive at an agreement with holders of $3-billion of its external bonds (so-called Eurobonds). The government was requesting a six-month extension in interest payments that were due a month ago, a request that was turned down by its bondholders.

After having much of its external debt written off in the mid 2000s as part of the Heavily Indebted Poor Country initiative, Zambia began to unsustainably accumulate new debt in 2012. The new debt cycle was facilitated by the country getting a sovereign debt rating in 2011. The rating was bestowed by the international ratings agency Fitch, which, at the time, considered the country to have a “stable” outlook in so far as the risk of default was concerned.   

With Fitch’s blessing secured, dollars began to flow into Zambia, heralding the era of the international financialisation of the country. In September 2012, Zambia issued its first Eurobond worth $750-million to much fanfare on Wall Street. This bond issuance was so oversubscribed that two additional bonds totalling $2.25-billion were issued in 2014 and 2015, bringing the total bond outstanding to $3-billion.   

Zambia has, over the past two years or so, featured prominently in international debates concerning its level of indebtedness. What is inexcusable is the government’s reckless accumulation of external debt, which has increased by more than 1 000% since 2011. Most Zambians agree that there is little to show for all this debt except for an economy that is teetering on the brink. 

What is also inexcusable is just how reckless, ideological and dishonest much of the international debate has been. It has proceeded as if its ultimate goal was to force the country into a situation of debt distress. 


For starters, the subject of the actual level of debt that Zambia owes has been hotly debated in the Western press. In 2018, the London-based Africa Confidential, which anonymously publishes whistleblower-type reports on the African continent, ran a series of articles claiming that Zambia was hiding the true amount of its external debt and that the actual number had reached 100% of the country’s gross domestic product (GDP)

Given the size of the country’s GDP in 2018, Africa Confidential was suggesting that the Zambian government owed a total of $27-billion, an implausibly large number that has since been shown to be false. Africa Confidential is, however, yet to issue a retraction for its reckless coverage from 2018, coverage which has coloured how Zambia’s debt situation is viewed locally and abroad. 

Second, many in the Western press and governments, as well as international multilateral agencies, blame China for Zambia’s debt problems. The Financial Times ran an editorial in October effectively blaming China. The Economist has also pushed this line and so has the United States government and the International Monetary Fund (IMF). The IMF has, behind the scenes, made the restructuring of Chinese debt a precondition for balance of payments support to the country. 

To be sure, Zambia has borrowed substantial sums from China. According to the ministry of finance, the country owes about $3-billion to China (although there is some debate about the exact amount). But the lion’s share of Zambia’s external debt stock is owed to Western and Western allied institutions. Data from the World Bank shows that of the $11-billion the government owed external creditors at the end of last year, most of it (about 70%) was owed to entities allied to or headquartered in the West. These include the World Bank, the IMF, commercial banks and hedge funds. Only China and (reluctantly) the World Bank and IMF have given Zambia some debt relief this year. Western commercial banks and hedge funds, which together hold about $5-billion (or 50%) of Zambia’s external debt, have not batted an eye. It is worth remembering that Zambia’s debt problems started with the issuance of Eurobonds in 2012 that were swept up by Western banks and hedge funds. 

Another angle to the China story concerns misleading reports about Zambia pledging vital national assets as collateral in exchange for Chinese debt. Africa Confidential published a report in 2018 claiming that the national electricity utility, Zesco, was about to be taken over by China because it had been pledged as collateral. This story, too, has since been refuted by the Chinese and Zambian governments but not without the story growing its own legs and the false list of pledged national assets extending to include the national broadcaster and the national airport. China wants to win friends across the African continent, but grabbing sovereign assets is not the way to do it. Beijing knows better than to do that.     

Zambia’s current debt situation is concerning and is largely a result of the careless stewardship of the nation’s finances by the government. But that is not the only lesson to draw from this situation. The country is being used as fodder in a geopolitical battle raging between the West and China. The West, worried about its waning influence on the African continent, is carefully spinning a narrative, with Zambia as ground zero, that doing business with China is fatal. The truth is much more complex than this narrative. And caught in the middle of it all are the lives of Zambians who have now become the proverbial grass in the big ideological tussle of our times. 

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Grieve Chelwa
Grieve Chelwa, a Zambian, teaches economics at the Graduate School of Business at the University of Cape Town

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