Zambia in talks with Saudi Arabia to secure “cheap oil”
Zambia had launched talks with Saudi Arabia to secure “cheap oil” supplies, while also seeking support from the International Monetary Fund (IMF).
Zambian Minister of Energy Peter Kapala noted an attempt at a deal with Saudi Arabia by the previous government, but said there was a change of approach. Rather than buying the petroleum goods itself, the minister said, the government will bring together oil marketing companies and “negotiate great prices for petroleum products in a government-to-government deal”. Securing fuel supplies will help reduce price fluctuations, he said. Zambian government has also entered in talks with neighboring Angola on the Lobito refinery with the aim to secure a stake in the proposed Angolan plant in order to secure products.
The IMF, meanwhile, has announced a $1.3 billion credit arrangement for Zambia, running for 38 months. “Zambia is in debt distress and needs a deep and comprehensive debt treatment to place public debt on a sustainable path,” Kapala said. The need for action is becoming more pressing. Zambia stopped fuel subsidies and reduced tax on petrol and diesel in 2021. The tax cuts are due to end this month. In a recent report, the IMF warned that while such a move was necessary, higher “fuel and electricity prices may lead to social unrest. This could slow down much needed reforms and dent investor confidence.” Zambia is facing a tough economic climate. The country had US$1.3 billion of principal arrears at the end of 2021, out of which US$597 million was in fuel arrears, including US$169 million in late payment interest.