Thread by @marisalourenco

I recently spent two weeks in #Zambia, mainly in Lusaka, meeting clients, conducting research, speaking to government officials. Here are some of my key takeaways 🧵🇿🇲

DEBT - this issue came up everywhere, and with good reason. Not only is it driving macroeconomic instability, but the government is nowhere near concluding a deal. And why? Because its largest creditor, #China, isn't happy with the terms laid out by the G20.

It's NB to note Chinese debt is both bilateral (i.e. issued by govt) and private (e.g., held by companies/individuals). Govts generally don't mind debt repayments being deferred, but private creditors are different - they usually want their money back sooner, even at a loss.

Unfortunately, the G20 common framework doesn't allow for immediate repayments at a loss (known as a haircut). So really, the only solution is the Chinese government paying private Chinese creditors and taking on their debt as bilateral #debt. Then everyone can come to the table.

Given just how behind all these discussions are, the constant back and forth, it now seems unlikely a restructuring deal is forthcoming anytime soon. End of 2023 seems like a comfortable guess. Remember, how a restructuring deal would LOOK has not even begun to be discussed.

COST OF LIVING - everyone is feeling the pinch, and of course, it's low-income earners that are feeling it the most. The price of #fuel and cooking oil has skyrocketed in recent months. The kwacha's weakening is exacerbating the issue, of course.

Many blame the #Hichilema administration for high prices, but it's out of its hands. Cost of living is determined by dollar strength, global #inflation, higher #oil prices, etc. And with the IMF in the mix, govt support is out the window and austerity is the name of the game.

CURRENCY - After Hichilema's/UPND's wins over Lungu/PF in August 2021, the #kwacha gained against the US dollar. But this was a false improvement, i.e., one that had no structural basis. It was driven by market sentiment that reacted positively to the change in administration.

So of course, the kwacha is back to trading at over ZK20/USD 1, which is exactly where it was towards the end of Lungu's term. And only increased imports from #mining, #agriculture will increased FX earnings and strengthen the currency. Unfortunately, #copper production is down--

--though #agriculture is bringing some respite, especially as trade has increased with neighbour DRC. Agriculture is unreliable though, much smaller than the mining sector, and also unsophisticated - agro-processing would truly transform the sector, but Zambia is not there yet.

POLITICS - Towards the end of #Lungu's time in office, many people described a "feeling of fear in the streets" that apparently has lifted "the minute Hichilema took office". This is good - it shows genuine commitment to a more democratic society.

There is, of course, frustration, which is not always fairly placed at Hichilema's feet. But it is unlikely to translate into social unrest at this point. People are struggling, but they appear patient.

MINING - There is a great deal of interest in the mines run by KCM and MCM from a host of players - including those from the West, China, and #India. Zambia not only has copper, it has #nickel, #cobalt, #manganese, all critical to the #energytransition.

But talks are slow at the moment, primarily because of the economic situation that limits what government can invest in its mines alongside foreign investors. As soon as a deal is rushed, mining companies will rush to commit - and the competition will be fierce.

Reach out if you'd like to know more ✉️