The government of Zambia signaled last week that new debt issuance would be postponed indefinitely, in order to reach a financing agreement with the IMF. Zambia repeatedly did not qualify for an IMF loan on a fundamental precondition, data transparency. The current debt level is the key issue. Officially, public debt should reach 66% of GDP in 2018, a major increase from 27% in 2013. Despite that, the hidden debt debate has not really faded since then. In Zambia, independent estimates show that public debt may be +20pp higher, at 86% of GDP (less than Mozambique in 2016 and Congo Republic in 2017 where the revisions were by +50pp), including bilateral debt to China in the ratio. Some of this debt was originated by SOEs, but since there is a state guarantee this debt should be considered as public. Overall, we do not see this issue as a major risk to our current growth forecast (+4.5% in 2018) but a debt rescheduling would help to free up more growth potential in the medium-run.
