The Third-Largest Economy In Southern Africa Faces Challenges

The Third-Largest Economy In Southern Africa Faces Challenges

The Republic of Zambia is a country in Southern-Central Africa. Today Zambia is still dealing with economic reform issues and averages between $7.5 billion and $8 billion of exports annually. The country’s sovereign debt will reach 96% of its gross domestic product (GDP) in 2020. Economic regulations and corruption are widespread. Most rural Zambians are subsistence farmers. However, Zambians face serious problems in unemployment and underemployment in urban areas. Rural poverty rates stand at about 77.9% and urban poverty rates at about 27.5%. Thus, social indicators continue to decline. However, the republic has the third-largest economy in Southern Africa.

China has been providing billions of dollars of loans for various infrastructure projects to a variety of countries of the sub-Saharan region.  Zambia is not an exception, and it’s also one of the biggest debtors.  

Zambia's economic issues and Chinese companies

Zambia’s economic problems are far from being over. Chinese companies made it clear that they have no intention to restructure existing debt.

 

These loans are a part of a Belt & Road Initiative, which is a global development strategy adopted by the Chinese government in 2013. It involves infrastructure development and investments in up to 70 countries and international organizations in Europe, Asia, and Africa. This program has, however, created problems for countries that are unable to pay the debts on time.

 

Moreover, this project is not elevating Zambia’s status, and the republic is facing problems in many industries.  For example, two countries, Zambia and Zimbabwe, suffer from 20-hour power cuts. Severe droughts have harmed hydropower plants. As sovereign debt continues to grow, supply fell by 810 megawatts in November 2019, meaning Zambia is unable to pay electricity imports.

 

China Exim Bank issued a warning in March 2019 and threatened that it would stop work on infrastructure project payment. The bank has thought of starting to gather all the debts other countries owe it. Exim Bank also provided a $232 million loan for this venture. Zambian government should eventually come up with a plan on how to deal with the excessive amount of debt.

Sending
User Review
0 (0 votes)

RELATED POSTS

Leave a Reply

tmn-img-28-1

Share this on

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn

Rec­om­mended for You

Subscribe to Our Newsletters

Have The Best Of Trade Market News Delivered Directly To Your
Mailbox. Subscribe To Receive The Latest Market News.