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Zambia looking for IMF loan for new electricity projects

The Zambian government has applied to the International Monetary Fund (IMF) for a loan of US$ 450 million to enable its utility company – Zambia Electricity Supply Corporation (ZESCO) – implement new projects that wil l expand the country’s hydro-electricity generation capacity.

If granted, the loan will also be used to fund the expansion of the Kariba North Bank power station extension on the Zambezi river on the border with Zimbabwe, I tezhi-tezhi power station on the Kafue river while an undisclosed amount from th e loan will be for the rehabilitation of the Kafue Gorge power plant and Kariba.

In his application (dated 7 May) to the IMF Managing Director Dominique Strauss- Khan, Zambian Finance and National Planning Minister, Ng’andu Magande, noted tha t apart from seeking the loans, the Zambian government was also in the process of

allowing ZESCO and the Energy Regulation Board adjust electricity tariffs to mor e profitable levels.

For sometime now, foreign investors have been shunning to put their money into Z ambia’s energy sector because they fear they will make losses since return on in v estment is relatively low.

“Given the importance of raising electricity supply to achieve the medium-term g rowth objectives, as well as limited availability of grants or concessional fina n cing, the government and or ZESCO may likely need to contract new non-concession a l external borrowing for these projects in 2008,” Magande stated in his letter.

“Government is conscious of the gravity of the current shortage of electric powe r and the risk it poses to sustained growth. Development of the electricity sect o r is vital to achieving sustained high growth and reducing poverty,” he added.

In a move aimed at improving the liquidity position of ZESCO, government has als o ordered ministries, departments and other quasi-government spending agencies t o start paying in full their electricity bills.

“As a first step to improve the financial footing of ZESCO, the government will ensure that all arrears owed to ZESCO by ministries, provinces and spending agen c ies are paid by the end of December 2008,” the minister observed.

Zambia, together with the rest of Southern Africa, have been in the grip of deva stating shortages of electricity that have left most utilities resorting to load

shedding — periodic switching on/off energy to specific target groups such as r e sidential areas or entire towns.

Consequently ZESCO is currently rehabilitating its power generating plants so th at they will be able to generate maximum electricity in the short term while mon e y is being sought to finance entirely new generating plants in the long run.


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