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U.S. Treasury chief visits Zambia

Yellen urges resolution of nation’s Chinese debt burden by FATIMA HUSSEIN The Associated Press | January 24, 2023 at 2:24 a.m.
U.S. Treasury Secretary Janet Yellen, left, walks with Zambia's President Hakainde Hichilema during their meeting at the State House in Lusaka, Zambia, Jan. 23, 2023. (AP Photo/Salim Dawood)

LUSAKA, Zambia -- U.S. Treasury Secretary Janet Yellen, on the second leg of an African tour aimed at promoting American investment and ties, said Monday it's crucial to immediately address Zambia's heavy debt burden with China.

Yellen was in Lusaka, a capital city that's visibly dominated by Chinese financing. Visitors to Lusaka arriving at the renovated Kenneth Kaunda International Airport see a facility expanded in 2015 with Chinese money. A ride into the city passes billboards and newly built firms bearing Chinese signage, more evidence of Beijing's influence and increasing competition with the United States.

But the growth the country has experienced has come with a heavier debt burden. Zambia became Africa's first coronavirus pandemic-era sovereign nation to default when it failed to make a $42.5 million bond payment to China in November 2020. Negotiations over how to deal with the debt load have been ongoing.

Experts say a prolonged debt crisis could permanently prevent countries like Zambia from recovering, leading to an entire nation sliding deeper into poverty and joblessness. Such a crisis could also exclude the countries from credit to rebuild.

"It's critically important to address it right away," Yellen told reporters at a Monday morning press conference in Zambia's National Public Health Institute.

How Zambia's debt is renegotiated with China -- and how quickly -- will provide a test case for how lenient China will be with other overextended nations that face debt distress.

On Monday, Yellen said that while she had "constructive" conversations with her Chinese counterpart on Zambia's debt in Switzerland during a first face-to-face meeting last week, "it's taken far too long already to resolve this matter."

Addressing Zambia's debt is a primary reason for Yellen's visit there, and the Treasury secretary met with Zambia's president and finance minister Monday to discuss the ongoing negotiations with China.

Zambian President Hakainde Hichilema said during a bilateral meeting with Yellen that the country faces a late March deadline to find a solution to its debt overhang, which would then further drag its economy.

Yusuf Dodia, an economist and director of Action Group Zambia, told The Associated Press that while analysts say Zambia shouldn't take on more debt, "there are infrastructure projects that we need done to change the trajectory of the Zambian economy."

"If we had a widespread railway system, that would ensure that the cost of transport in Zambia would be brought down to 15% of the current cost -- right now we're dependent on busing and trucking -- that would lower the cost of doing business."

Also Monday, Yellen toured Mylan Laboratories, a packaging subsidiary of American pharmaceutical manufacturer Viatris. The lab opened in 2010 with a $10 million U.S. investment, packaging drugs that treat malaria and HIV.

Still, Yellen insists her trip is not about competition with China.

"We want to deepen our engagement," she said "We see a rapidly growing young population that needs opportunities and economic growth.

"We have many government programs and international programs that are oriented to help efforts to build infrastructure," she said. "And when we do that, we want to make sure that we don't create the same problems that Chinese investment has sometimes created here."

Yellen said the U.S. wants to invest in companies with contracts that "have transparency, that we have projects that really bring broad-based benefits to the African people and don't leave a legacy of unsustainable debt."

She also made a stop at the Zambia National Public Health Institute, considered a model of its kind.

Yellen started her 10-day African trip last week in Senegal, where she visited a onetime slave-trading post, and will soon visit South Africa.

The Biden administration's tour of Africa continues as the U.S. ambassador to the United Nations, Linda Thomas-Greenfield, announced she would be the second Cabinet member heading to Africa -- to Ghana, Mozambique and Kenya starting Jan. 25 -- as part of President Joe Biden's push to engage with the world's second-largest continent.

In December, the White House announced the administration's support for the African Union becoming a permanent member of the Group of 20 nations.

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