Zambia seals US$6.3 billion restructuring in breakthrough for indebted nations

Zambia in 2020 became the first African country to default on its sovereign debt during the COVID-19 pandemic and struggled since then in protracted discussions to agree a deal

Zambia has struck a deal to restructure US$6.3 billion in debt owed to governments abroad including China, in a breakthrough for indebted nations around the world that have faced lengthy negotiations with their creditors.

China is the largest official creditor to Zambia, with US$4.1 billion owed to the Export-Import Bank of China alone, underlining the importance of Beijing’s support for the deal.

Zambia in 2020 became the first African country to default on its sovereign debt during the COVID-19 pandemic and struggled since then in protracted discussions to agree a deal.

“Zambia has reached an agreement on a debt treatment with our official creditors – a significant milestone in our journey towards economic recovery & growth,” Zambian President Hakainde Hichilema wrote on Twitter.

The agreement reached at a summit in Paris calls for Zambia’s debt to be rescheduled over more than 20 years with a three-year grace period during which only payments on interest are due.

The debt earmarked for restructuring includes US$1.3 billion in arrears, and private sector creditors are expected to do the same on the US$6.8 billion owed to them, according to a French official who asked not to be identified.

Zambia is viewed as a test case for a debt restructuring framework backed by the Group of 20 wealthy nations and intended to streamline relief for countries caught in a developing world debt crisis sparked in part by the pandemic.

However, the process has been painfully slow for Zambia, a fact that has discouraged all but a handful of other struggling governments from seeking help under the mechanism.

Beijing was keen not to be seen further holding up debt relief for Zambia at the summit, the French official said, adding that French President Emmanuel Macron’s talks with Chinese authorities in Beijing in April also helped unblock the situation.

Macron called the debt restructuring deal “a historic achievement”.

“We remain mobilised to ensure that other countries caught in a debt trap benefit from a multilateral response,” Macron added on Twitter.

The agreement with official creditors means Zambia will be able to receive another US$188 million tranche of money from the International Monetary Fund, part of a US$1.3 billion package approved in September.

“This agreement paves the way for the completion of the first review of Zambia’s three-year Extended Credit Facility Arrangement, which is helping put Zambia on a path toward sustainable economic growth and poverty reduction,” IMF Managing Director Kristalina Georgieva said in a statement.


The scale of the debt relief Zambia requires has been a concern for some of its main creditors. Some Western officials accused China of dragging its feet in restructuring talks, something Beijing denied.

While the debt earmarked for overhaul stood at US$6.3 billion, the last IMF debt sustainability analysis states that Zambia owed US$8 billion to bilateral creditors at the end of 2021. It was unclear where the discrepancy was coming from.

U.S. Treasury Secretary Janet Yellen said in a statement: “I urge all official bilateral and private sector creditors to quickly finalise the debt restructuring process that will provide relief to Zambian families and encourage the private investment that is needed to jump start the economy.”

A source close to the Zambian government said the deal is “really historic” and due to meaningful efforts from creditors, “notably China”, predicting the next Common Framework debt overhaul would progress faster.

Chinese Premier Li Qiang, speaking in Paris, said Beijing was “ready to be engaged in debt relief efforts in an effective, realistic and comprehensive manner in keeping with the principle of fair burden-sharing.”

However, others sounded more cautious about the Common Framework as a tool to overhaul debt burdens.

“If we have a Common Framework the problem is we move as fast as the slowest creditor so we get tied down,” said President Ranil Wickremesinghe of Sri Lanka, which is undergoing a debt restructuring but was too wealthy to qualify for the G20 programme.

“That’s why we are not in favour of a Common Framework – we were able to get traction with the most committed creditors.”

Zambia’s Hichilema was one of about 40 leaders attending a summit in France on Thursday and Friday aimed at easing the debt burden on some of the world’s most vulnerable countries while freeing up billions of dollars in new funds for climate finance.

Zambia’s international bonds traded up to half a cent higher on Friday with the 2024 issue hitting a nine-month high early on.

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