Zambia, which became Africa’s first pandemic-era sovereign defaulter in 2020, has been seeking to restructure its dollar obligations under the Group of 20’s Common Framework, a set of guidelines that the most powerful countries drafted to mitigate debt crises in poorer states. Under those rules, Zambia first needed to reach a preliminary bailout deal with the International Monetary Fund, which it did in December.
Disagreements among official creditors or prolonged negotiations with private lenders could delay an eventual restructuring deal and IMF approval into the second half of this year or even into 2023, Fitch Ratings said this week.
Zambia’s $1 billion in Eurobonds due April 2024 have fallen 6% this year to trade at 74 cents on the dollar by 3:43 p.m. in London.
Zambian Finance Minister Situmbeko Musokotwane on Dec. 15 asked bilateral lenders to form an official creditors committee as soon as possible. That’s yet to happen, even as the IMF and World Bank have since completed a debt sustainability analysis that sets the economic criteria used in negotiations for debt treatment.
Ford didn’t identify the creditor that she said has been delaying the process, and Musokotwane declined to name it when asked at a briefing on Thursday.
“I am afraid I can not release that because there are diplomatic issues that we are following,” he said in Lusaka. “Mentioning the name obviously does not help.”
Out of Zambia’s total $17.3 billion of external public-sector debt, commercial and state-owned Chinese lenders account for $5.5 billion, making the nation by far the biggest source of Zambia’s loans, according to Finance Ministry data. Zambia owes $3.3 billion in Eurobonds and interest arrears since it defaulted at the end of 2020 and stopped servicing almost all other international loans. It also has a $147 million debt to Russia’s export-import bank.
The Chinese Embassy in Lusaka didn’t immediately respond to emails seeking comment. Chinese creditors were “puzzled” about Zambia’s restructuring plans, the nation’s ambassador to Zambia, Li Jie, said in November.
Zambia had been targeting a deal with creditors in the first half of this year, in order to have its $1.4 billion deal with the IMF concluded by June. There has been behind-the-scenes work to establish an official creditors committee co-chaired by China and South Africa, Eurasia Group said in a note to clients last week.
South Africa is still finalizing its delegation for the creditor committee for Zambia, the National Treasury said in reply to emailed questions on April 4.
Ford said she’d be discussing with the IMF and World Bank how to expedite Zambia’s debt treatment at their spring meetings in Washington from April 18 to 23.
“I’m really encouraging them to say: How can we get this process going faster?” said Ford. “Because the longer it’s going, the more that overhang of uncertainty is going to impact on people here.”