The Economist Intelligence Unit (EIU) has maintained its forecast for the 2021 general elections, putting the Patriotic Front and its presidential candidate President Edgar Lungu in the lead albeit under very tight conditions.

In its latest release of December 26, 2019, the EIU has however warned that the people’s frustrations over worsening economic conditions could trigger violence.

“The ruling Patriotic Front (PF), led by the President Edgar Lungu, is expected to retain power. Zambia will, however, face substantial threats to underlying political stability in 2020-24, and simmering popular frustration over economic and political grievances could quickly turn violent. In 2020, the cumulative impact of food, power tariffs and fuel hikes on consumers threatens to create widespread unrest, even if recession is avoided. The run-up to the 2021 legislative and presidential elections will be another unstable period, during which a vulnerable PF will aggressively narrow the political space and escalate crackdowns,” the EIU stated.

“A final layer of risk emanates from the burgeoning economic influence of China in Zambia’s affairs. Should Zambia be unable to refinance its current debt via private capital markets, it may be forced into a debt for equity swap to restructure its bilateral debt with China. However, any sign that the government plans to sell key state assets to China in order to secure debt relief would be interpreted by ordinary Zambians as a loss of sovereignty, with the resulting public backlash liable to aggravate existing social tensions… with the government likely to make maximum use of incumbency advantages, our baseline forecast remains for Mr Lungu and the PF to win in 2021.”

It has forecast continued stability in the country.

“ At present, The Economist Intelligence Unit continues to forecast that stability will be maintained; Zambia has no armed opposition force, its army is professional and Mr Lungu has in the past imposed a state of emergency to quell unrest, which he could resort to again if necessary,” the EIU stated.

On international relations, the EIU stated that Zambia will continue to deepen its dependency on its main bilateral creditor, China.

“In exchange, Chinese state-owned lenders will probably agree to debt restructuring, preventing a sovereign default. However, the restructuring will be on the proviso that Zambia borrows more (albeit at a lower rate) for a string of Chinese-contracted infrastructure projects, and potentially allows debt-for-equity swaps on state-owned enterprises. This will provide some financial relief in the short term, while further compromising relations with Western donors and investors (many of whom

regard an IMF package as indispensable), and jeopardising long-term debt sustainability. We

forecast that Zambia’s current austerity programme will ultimately founder, on China’s insistence that projects that it is financing proceed as planned,” it stated.

The EIU further stated that the government’s borrowing plans, as outlined in its medium­term expenditure framework, suggest that a loan deal with the IMF is no longer a priority in the near-to-medium term, but has warned that not taking on the package presents the country a risk of failure to liquidate the outstanding $3 billion Eurobond debt. risks

“Without an IMF programme, it is uncertain how Zambia will repay US$3bn in outstanding

Eurobond debt. A first US$750m bullet repayment is due in 2022, and there is no obvious way of meeting the commitment (underscoring the unproductive use of the funds). A bilateral loan from China sufficient to cover the repayment may be forthcoming, or the government may try offloading strategic assets (perhaps from KCM). Consequently, we have not included a default in the current forecast. However, the risk of default will persist, weighing heavily on investor confidence. New debt data show large build-up in external arrears,” it stated.


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