Zambia slumps towards another debt crisis

THE cars in Lusaka are moving even more slowly than usual: hidden speed cameras have spooked drivers in Zambia’s capital. The government is desperate for cash, so motorists who speed are being fleeced. The regime has also announced taxes on boreholes, internet calls and even weather reports. “The pressure is falling on the ordinary people,” complains John Phiri, a taxi driver. “All because the state has run up too much credit.”

Concern on the street is mirrored in markets. Of the 75 countries whose bonds make up the Bloomberg Barclays Emerging Markets Index, a basket of sovereign debt, none has performed as badly in 2018 as Zambia (see chart). Given crises in Argentina and Turkey, that is some achievement. “The market is pricing in a default,” notes Gregory Smith of Renaissance Capital, an investment bank. Zambia is therefore a warning for other African countries which also received debt forgiveness in 2005-06 but today find themselves on the verge of another crisis.