THE MIRROR OF MEDIA

Zambia’s Lungu faces tight election contest as debt crisis bites


Zambia’s President Edgar Lungu will search to fend off a perennial opposition challenger in a vote on Thursday which may be determined by pissed off younger voters amid financial turmoil and a pending bailout for one in all Africa’s most indebted nations.

Traders are carefully watching the Aug. 12 vote within the main copper producer which had the continent’s first pandemic-era sovereign default in November.

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Worldwide Financial Fund (IMF) help, already broadly agreed, is on maintain till after the vote. So too is debt restructuring seen as an early take a look at of a brand new world plan to ease poor international locations’ burden.

In energy since 2015, 64-year-old Lungu faces a probably tight contest in opposition to Hakainde Hichilema – referred to as “HH” – a businessman who has criticised the incumbent’s financial administration.

Whereas Hichilema has proven a need to deal with the debt issues and have interaction with traders, Lungu’s Patriotic Entrance (PF) for years sought to keep away from an IMF programme, famous Christian Libralato, rising markets portfolio supervisor at BlueBay Asset Administration.

“Traders might even see a probably clearer path to an IMF programme and a debt restructuring below HH,” mentioned Libralato, whose agency holds Zambia’s defaulted bonds.

Zambia owes in extra of $12 billion to exterior collectors and spends 30%-40% of its revenues simply assembly the curiosity funds on its debt, credit standing agency S&P World estimates. Its debt-to-GDP ratio was close to 120% final yr, one of many highest in rising markets and possibly double the extent thought of to be manageable.

Zambia mentioned in Might it had reached a broad settlement with the IMF on macroeconomic and financial targets and coverage points throughout talks to safe lending, setting the stage for what traders hope might be a post-election deal.

Youth vote

Zambia’s electoral fee in Might introduced a ban on marketing campaign rallies to curb the unfold of COVID-19. However each the PF and Hichilema’s United Get together for Nationwide Improvement have held gatherings on the pretext of distributing face masks.

Lungu is campaigning on infrastructure investments and elevated state management of mining.

Copper mining, which generates round 70% of Zambia’s export revenues, has been extremely politicised within the run-up to the election.

Zambia’s state mining funding arm ZCCM-IH agreed in January to tackle $1.5 billion in debt in trade for full management of Mopani Copper Mines, which earlier majority proprietor Glencore had deliberate to shutter.

Lungu framed the deal as a boon for staff.

Hichilema, nonetheless, criticised it, saying it added to Zambia’s debt load.

Hichilema, 59, casts himself as a self-made man in marketing campaign movies, saying he walked to high school barefoot as a toddler and attended college on a authorities bursary. He was CEO of an accountancy agency earlier than getting into politics.

He has contested and misplaced 5 presidential elections, however solely narrowly misplaced to Lungu in 2016’s disputed vote. He was charged with treason and briefly jailed the next yr.

With polls seen as unreliable, analysts say this election is simply too near name. Political violence has escalated forward of the vote, together with two ruling celebration supporters hacked to loss of life with machetes, main Lungu to deploy the army.

Some 54% of registered voters are 34 or youthful, statistics from the Electoral Fee of Zambia (ECZ) present.

That would assist Hichilema, who has positioned the financial system entrance and centre of his marketing campaign, mentioned Euston Chiputa, historical past professor on the College of Zambia.

“Hichilema has gained floor among the many youth as a result of there are frustrations relating to employment,” he mentioned.

Unemployment hit a 10-year excessive in 2020, in line with Worldwide Labour Organisation estimates, and the native kwacha foreign money’s almost 40% depreciation since January 2020 has made life dearer for Zambia’s roughly 18 million folks.

The roads, faculties, and hospitals constructed by Lungu’s authorities and paid for by debt – notably Chinese language loans and eurobonds – haven’t but delivered promised progress.

The IMF expects the financial system to be among the many weakest in Africa this yr, with GDP set to develop simply 0.6% after a 3.5% contraction final yr.

A win for Hichilema, seen as a market-friendly candidate, may set off a reduction rally for Zambian belongings, mentioned Kevin Daly at Aberdeen Normal Investments, a member of the Zambia Exterior Bondholder Committee, which represents holders of Zambia’s eurobonds.

Zambian authorities bonds have already gained greater than 30% since November as traders look to an IMF deal.

Zambia can be set to be the most important beneficiary of the IMF’s new $650 billion allocation of Particular Drawing Rights, which is able to enhance its international reserves.



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