China stated that the key to resolving Zambia’s debt crisis lies in the hands of multilateral financial institutions and commercial creditors. China urged multilateral development banks, including the World Bank, to offer debt relief to Zambia.
China stated that the key to resolving Zambia’s debt crisis lies in the hands of multilateral financial institutions and commercial creditors. China urged multilateral development banks, including the World Bank, to offer debt relief to Zambia. Chinese foreign ministry spokeswoman, Mao Ning, pointed out that multilateral institutions and private creditors hold the majority of Zambia’s foreign debt, accounting for 24% and 46% respectively. They jointly hold the bulk of Zambia’s foreign debt. The key to easing Zambia’s debt burden, she said, thus lies in the participation of multilateral financial institutions and commercial creditors in the debt relief efforts.
China’s push for debt relief for Zambia is a clear sign of its determination to reform the global system for restructuring sovereign debt, which has traditionally excluded lending by multilateral banks. This stance may lead to increased tensions with the World Bank and further prolong the already drawn-out debt talks. Mao reiterated the importance China places on resolving Zambia’s debt crisis and its role in handling the country’s debt under the G-20 Common Framework, an initiative that brings together the Paris Club of traditional rich lender countries, private creditors, and China to restructure the debts of low-income countries on a case-by-case basis. China highlighted the importance of Africa’s debt issue in the context of development. According to Mao, China’s financing cooperation with Africa has always been centered around enhancing Africa’s capacity for independent and sustainable development.
The G20 leaders have emphasized the importance of private and official bilateral creditors providing debt treatments that ensure fair burden sharing. However, members with divergent views on debt issues emphasized the importance of debt treatment by multilateral creditors like multilateral development banks (MDBs). This could pose a challenge as the IMF Managing Director Kristalina Georgieva leads the effort to get creditors to agree on a Common Framework when the G-20 finance ministers and central bankers meet in February. The Zambian debt talks are being closely monitored as they are seen as a test case for how sovereign debt restructuring will work in an era where China is the world’s largest sovereign lender and developing countries have issued dollar bonds to private owners. However, World Bank President David Malpass has rejected China’s call for debt relief, stating that there is no mechanism to do so and that this has already been actively discussed and rejected at the G-20. He added that it’s important for China to focus on reaching an actual debt restructuring that lightens the burden for Zambia.
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Recently, US Treasury Secretary Janet Yellen visited Zambia and called China a barrier to resolving Zambia’s debt crisis. She has called on China to agree to a rapid restructuring of loans to Zambia and pointed out that many African countries are plagued by unsustainable debt, much of which is related to Chinese investments in Africa.
