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By Gregory Mofu
In 2012, Zambia made history by issuing its debut Eurobond, raising $750 million in a highly successful sale that was oversubscribed by over 600%. The bond was issued in two tranches, and later followed by a second Eurobond worth $1 billion in 2015. The funds were meant to support infrastructure development, including transportation, energy, and water sectors.
However, 12 years later, the reality on the ground tells a different story. Despite borrowing a total of $1.75 billion, Zambia has little to show for it. The funds were meant to support critical infrastructure projects, but most of the money was squandered on consumption and poorly planned projects.
For example, the $120 million allocated to Zambia Railways Limited(ZRL), for instance, was meant to rehabilitate railway infrastructure. However, as we’ve seen, the money was misused, and the railway system remains in shambles. Infact the Head office of ZRL in Kabwe looks more of a museum than Lusaka Museum.
But that’s not all – Zambia has defaulted on the payments of both Eurobonds, a clear indication of the government’s failure to manage the funds effectively. The money borrowed was supposed to be invested in viable projects that would have generated revenue to pay back the loans. Instead, the funds were used for short-term gains, and now the country is struggling to pay back the debts. Currently, the government is trying to borrow more money to pay back the Eurobonds, a clear sign of the vicious debt cycle that the country has been trapped in.
This is a classic case of borrowing to consume, rather than invest. Zambia’s government failed to prioritize investment in productive sectors, instead using the funds for short-term gains. The result is a ballooning debt burden, with little economic growth to show for it.
As we continue to borrow more money, we must learn from past mistakes. We must prioritize investment in critical sectors like agriculture, manufacturing, and renewable energy. Only then can we ensure that our borrowing is sustainable and benefits future generations.
The failure of Zambia’s Eurobond experiment serves as a cautionary tale. We must do better. We must borrow to invest, not consume.
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