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Zambia, which is pushing for debt restructuring, says it has reached a deal with its creditors. Zambian President Hakainde Hichilema has announced that it has agreed to a historical agreement with private creditors holding USD 3.5 billion worth of Eurobonds, lifting a key hurdle in the long-sought restructuring of the country’s debt.
The latest deal proposes swapping Zambia’s three existing instruments into two amortising bonds, one of which would deliver higher repayments if the country’s economic outlook and capability of dealing with its debt burden improve.
Zambia, Africa’s biggest copper producer, with a population of nearly 20 million people, defaulted on its USD 18.6 billion external debt in 2020 but negotiations had stumbled over differences between China and Western creditors. Hichilema said in December about 98% of official creditors have now signed a memorandum of understanding to restructure Zambia’s debt which was estimated at USD 32.8 billion at the end of 2022.
Last year, Lusaka reached an agreement in principle with its creditors on USD 6.3 billion of its debt under a signed memorandum of understanding with its Official Creditor Committee (OCC). Some official creditors including China initially rejected it, complaining about the more favourable conditions granted to some private lenders.
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Until now, talks with private creditors had become deadlocked. Hichilema said in December that the dispute was over a “comparability of treatment” rule under a debt restructuring framework for the poorest countries agreed by the G20 group in 2020. This requires all creditors to take similar losses in any debt restructuring deal. Zambia is seen as a test case for the G20 common framework at a time when there are rising concerns over debt in low-income nations.
