Calay News
Countries that are creditors of Zambia have reached an agreement to restructure a portion of the debt of this African country, which has a significant debt with China. According to a French government source, an agreement has been reached to restructure US$6.3 billion of Zambia’s debt. The country, which has a population of 20 million, was the first in Africa to declare a moratorium on payments after the outbreak of the COVID-19 pandemic in 2020. Negotiations for debt restructuring had been hampered due to differences between Western creditors and China.
International Monetary Fund (IMF) Managing Director Kristalina Georgieva congratulated Zambian President Hakainde Hichilema, highlighting a “swift and efficient” restructuring during a speech at the international summit in Paris. Zambia’s total debt at the end of 2022 amounted to $32.8 billion, of which $18.6 billion was owed to foreign creditors, according to Ministry of Finance data.
Although the government has yet to see the deal in its entirety, a source close to the Zambian presidency noted that, so far, it is a positive thing. President Hichilema thanked official creditors for their continued support and commitment, calling this agreement an important step towards the country’s economic recovery and growth.
Zambia’s external debt restructuring refers to bilateral loans granted by countries, with China being the largest creditor with US$4.1 billion out of the total US$6.3 billion. Private creditors will also have to make a comparable effort to states in debt restructuring, and a clause was included in the agreement approved by both Zambia and the IMF.
Zambia’s debt skyrocketed during the presidency of Edgar Lungu due to massive borrowing to finance infrastructure projects. Despite its significant copper reserves, the country’s economy was affected by the fall in copper prices, and today half of the population lives below the poverty line.
The COVID-19 pandemic hit economically fragile countries hard, especially in Africa, and the war in Ukraine has aggravated the situation due to its impact on food prices. According to the IMF, the cost of debt financing for these countries in the financial markets is three times higher than that of countries with advanced economies. The IMF estimates that there are 22 countries that have reached or are approaching a high level of debt distress.
US Treasury Secretary Janet Yellen stated that she will “press” for the full and prompt participation of all bilateral creditors in the debt negotiations of vulnerable countries.
