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Yellen Criticizes China, Urges Headway in Zambian Debt Talks

Yellen Criticizes China, Urges Headway in Zambian Debt Talks
A man holds a collection of Zambian kwacha 50 denomination banknotes in this arranged photograph in Lusaka, Zambia, on 8 October 2015. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

US Treasury Secretary Janet Yellen urged Zambia’s creditors to work quickly to restructure the southern Africa nation’s debts, and accused China of obstructing a deal.

Zambia became Africa’s first pandemic-era sovereign defaulter in 2020, and since then has been struggling to revamp external debt that topped $17 billion, more than a third of which is held by Chinese creditors.“It’s critically important to address it right away,” Yellen told reporters in Lusaka, Zambia’s capital. “It’s taken far too long already to resolve this matter.”

Zambia has become a crucial test case for the Group of 20 powerful nation’s Common Framework for debt restructuring that brings traditional Western creditors around the same negotiating table with China, now the biggest official lender to the developing world. This week, both Yellen and International Monetary Fund Managing Director Kristalina Georgieva are visiting Zambia to try expedite a deal.

Slow Progress

Since Zambia’s first official creditors committee meeting in June last year — with China and France as co-chairs — progress has been slow. The government remains in default, and arrears continue to grow. The nation’s currency has depreciated against the dollar every day for nearly two months, and is at its weakest in nearly a year as talks drag on.

“I am encouraged that progress may become possible shortly. I know that the Chinese have been a barrier to concluding the negotiations,” said Yellen, who spoke positively of her recent meeting in Zurich with Chinese Vice Premier Liu He. “I specifically raised the issue of Zambia and asked for their cooperation in trying to reach a speedy resolution. And our talks were constructive.”

Zambia finalizing a debt deal is a top priority for the US Treasury Department, Yellen said in remarks during a meeting with Finance Minister Situmbeko Musokotwane. The US will continue to push creditors to provide relief, “especially China,” she said.

Musokotwane said while it was “embarrassing” for Zambia to talk about the debt issue, the government wasn’t shying away from dealing with the problem, and it was unfortunate that the process was proceeding slowly given that Zambia had fulfilled all its commitments.

Depends on China

Zambian President Hakainde Hichilema was grateful for US support for his country over the years and said the debt restructuring was an extremely important issue that needed to be resolved.

“If not concluded soon, it’s going to distort all the good efforts that we’ve been making to reconstruct the economy,” he told Georgieva earlier in the day.

“I completely agree with you that the Common Framework needs to act more swiftly, more decisively and more predictably to give governments like the government of Zambia a clear framework for economic policy making,” Georgieva said in a speech.

The Chinese Embassy in Lusaka didn’t immediately respond to requests for comment.

While Yellen will try pressure Zambia’s creditors to reach a deal, “an outcome really depends on Chinese decision-making,” said Scott Morris, a senior fellow at the Center for Global Development in Washington.

“The US playbook is very much about keeping the pressure up, keeping visibility on this,” Morris said, adding there may be some value in Zambia hosting both Yellen and Georgieva simultaneously. “But the Zambians alone aren’t in any position to resolve this. It’s a negotiation with their leading creditors, so that’s the main dilemma.”

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