Zambia’s growing debt crisis has led to a 21% reduction in public spending on education (Antonella865/Dreamstime.com) Zambia has cancelled a $1.6bn loan from the China Export Import Bank and the Industrial Commercial Bank of China to reduce its debt burden, the South China Morning Post reports.

The money, which had been approved but not transferred, was earmarked for 14 road and telecoms projects. In particular, some $1.2bn was intended to upgrade a 315km motorway between the capital, Lusaka, and the city of Ndola in the country’s Copperbelt. The project was to have been carried out by the China Jiangxi Corporation.

In all, Zambia has cancelled $2bn in undisbursed loans from external creditors before bilateral lenders agreed on Saturday to provide debt relief to the Southern African nation.

Zambia’s Ministry of Finance and National Planning said: “Measures have been taken by the government of the Republic of Zambia to address the current debt challenges – beyond the debt restructuring process. Cabinet, at its sitting on Thursday … took measures to discontinue some loan-financed projects."

The ministry said it had started talks with creditors and contractors to formalise the cancellation of works contracts, and added that other projects would be redesigned to spread their financing over a longer period.

As well as road schemes, the retrenchment has halted Smart Zambia phase II, a national broadband network that was to have been installed by Huawei at a cost of $333m. That project was also to have involved the building of a national data centre and a training facility.

Zambia has also cancelled a $159m loan that was to have funded the Chalala army barracks in Lusaka.

Besides Chinese loans, Zambia cancelled a $380m loan from the British Standard Chartered Bank for the building of Kafulafuta Dam.

Lusaka owes Chinese lenders about $6bn including airports, highways and power dams. The country has experienced difficulties in servicing this debt for some time. Spending on social services, including health and education, has fallen by 21% between 2019 and 2021, according to anti-poverty campaign group Debt Justice.

Official creditors, led by China and France, have agreed to provide debt relief. The decision paves the way for the country to access a $1.4bn bailout from the International Monetary Fund over the next three years. Lusaka is now seeking similar relief from private creditors over the $3bn it owes Eurobond holders.

Zambia’s Minister of Finance Situmbeko Musokotwane said the country would “continue to work with both official and private creditors to agree on the terms of the debt restructuring in line with the comparability of treatment principle”.