China should lead $17bn Zambia debt talks, minster says

Because that will help accelerate the resolution process, the southern African country’s finance minister said.
Image: Shutterstock

China should head the creditors committee being formed to renegotiate Zambia’s $17.3 billion of foreign debt because that will help accelerate the resolution process, the southern African country’s finance minister said.

The Asian nation, whose lenders account for more than one-third of Zambia’s total external public liabilities, in April indicated that it would join the official creditors committee, breathing life to a process that had stalled.

“It does make sense for our biggest creditor to play a leading part, to take a leading role in the proceedings,” Zambian Finance Minister Situmbeko Musokotwane said in an interview in Lusaka on Thursday. “They are willing to participate as a co-chair, and we welcome that because it will improve the chances of resolution — them being the biggest single creditors.”

The first African nation to default during the pandemic has been struggling to rework it’s external debt, including $3 billion in Eurobonds, since 2020. A quick resolution will help the continent’s second-largest copper producer access concessional loans from the World Bank and the African Development Bank and make it easier for companies to tap international markets to fund expansion.

President Hakainde Hichilema’s government has adopted the Group of 20’s so-called Common Framework for debt treatment designed to help poor countries. Progress has been slow, even after Zambia won preliminary approval for a $1.4 billion support package from the International Monetary Fund in December. The delay in China agreeing to join the process has been the biggest stumbling block.

“We are just very happy that they’ve now made a public announcement that they’ll now join,” Musokotwane said. “Whatever held them back before, that is history. We don’t want to get involved into that.”

Despite delays, Zambia remains roughly on track to complete restructuring talks by the end of next month and win final approval for the loan from the IMF’s board, he said.

France and South Africa have also offered to co-chair Zambia’s creditors committee, which will negotiate a restructuring of the debt within the confines of the findings of a debt sustainability analysis that the World Bank and IMF completed earlier this year. Under the Common Framework, Zambia will then ask private creditors to negotiate comparable terms for their debts.

© 2022 Bloomberg

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