International Economics: IB Economics

This World Bank clip looks at how helping facilitate trade can help Zambia engage with its 8 neighbours, in the hope of boosting economic growth and reducing inequality. The hope is that by reducing red tape at its borders and boosting agricultural exports, the economy can be helped to grow. 

The Zambian government is trying to restructure $15bn worth of outstanding debt in order to give the country some chance of recovering from its current financial crisis. China is currently the largest creditor, and will ask for greater clarity as regards an IMF loan that has helped the country in the past 12 months. 

Having come to the aid of Sri Lanka, the IMF has turned its attention to bailing out Zambia, a country with s financial crisis of its own, and similarly high debt levels.

Indeed, such has been the size of its debt repayments that public spending has fallen by nearly 20% between 2019 and 2021, a clear indication of the opportunity cost of debt. 

Mohamed El-Erian's latest piece suggests that for all the good that the unity over Ukraine appears to have done, we need to be careful that in only looking at the big picture, we're ignoring an number of other potential disasters that also pose a long-term threat to the world's most vulnerable - rising global food prices, debt concerns in the developing world, notably in places like Sri Lanka and Zambia, and the fallout from coronavirus all represent significant headwinds going forward. 

Zambia defaulted on some of its debt last Friday and there are concerns about where the country is headed, with some creditors suggesting that the government is failing to engage in constructive talks about debt restructuring. 

If so, the developmental consequences could be severe, with Zambia's ability to borrow severely curtailed and the associated costs to healthcare and education budgets being particularly damaging. 

I've scooped about this before, but now the threat of default has become real, with the Zambian government seemingly on the verge of defaulting on its foreign debt. 

The country has asked to defer interest payments until next year, but creditors haven't agreed to this, and there's a risk that if the country defaults it could have severe macroeconomic implications. 

Just a perfect development story, illustrating the rise of China in Africa, and capturing some of the many concerns regarding Chinese involvement in African economies. 

This piece, which originally appeared in Le Monde, looks at how China has increasingly inveigled its way into a position of strength in Zambia, financing infrastructure projects and accounting for an increasing amount of the economy's external debt. 

Critics argue that this has given China undue influence over the Zambian economy, but the article goes further in highlighting the extent to which other international financial organisations have also been responsible for many of the structural problems facing the Zambian economy.

Crikey! Microeconomics in a developmental context. However, for IB students, this is a good example of the need for market-oriented reform to foster development.

This World Bank clip look at how dominant producers in two sectors - sugar and cement - exploited their market power to raise prices and this adversely affected both consumers and producers who used the products as a factor of production.

Campaign group Debt Justice have uncovered evidence suggesting that a hardline position being adopted by five large private sector creditors, including US asset management company, BlackRock is hindering them being granted debt relief by some of the world's largest international financial organisations. 

As a result at the moment, only Chad has been granted debt relief under the current framework but Ethiopia, Ghana, Sri Lanka, Suriname and Zambia have not. 

Much like Sri Lanka has had a well-publicised economic crisis, Zambia too seems to be on the brink of economic collapse and there are calls for international lenders to write-off some of their loans.

Such debt relief would buy the country time to try and get its house in order, although with private investors holding nearly 50% of all debt, there are worries that they won't agree to this. As a result, there may well be some form of debt restructuring, otherwise the economy's development will stall. 

Phillip Inman argues that the Federal Reserve's response to higher US inflation has adverse implications for developing economies around the globe.

The reason? Higher US interest rates will mean higher debt repayments associated with dollar-denominated loans, and this could have adverse implications for developing economies from Sri Lanka to Zambia. 

Another developing economy experiencing a debt crisis is Zambia, and anti-poverty campaigners are arguing that a contributory factor to this is the behaviour of large private sector investors, such as BlackRock that have refused to reduce or delay payments, unlike governments and international financial organisations. 

There's an opportunity cost to this - because of its ongoing debt crisis, Zambia have cut health and social care spending by 20% in the past two years. 

A sobering piece about the impact of the coronavirus pandemic on global poverty and debt in emerging economies, with Gordon Brown calling for a restructuring of debt repayment plans to take account of the change in circumstances.

All of this in a week when Zambia looks like being the first country to default on its debt repayments.

Larry Elliott sounds the alarm, suggesting that the coronavirus is in danger of triggering an emerging market debt crisis, with Zambia seemingly the first to feel the pressure and likely to default on its debts.

This, of course, could have a dramatic effect upon its developmental prospects, and perhaps trigger a wave of defaults. It might also offer the Chinese yet more leverage over some of its African partners if they step in.

Good news for development in Zambia - one of my favourite sub-Saharan nations. The World Bank and Zambia have renewed the Country Partnership Framework (CPF) focusing on specific developmental objectives.

It's interesting to note the emphasis placed on institution-building, and the notion that the transition to better functioning markets needs to be supported by attempts to lessen the burden on the most vulnerable, notably the rural poor. It also indicates why the Washington Consensus of the later 20th century was so unpopular...