Zambia has suspended payment of its debts to coupon holders for the next six months in response to the devastating impact of the coronavirus disease on the economy.
A statement issued and signed by the secretary to the Treasury, Fredson Yamba, said the decision will affect coupon holders whose notew will mature in October, January and March.
“The Ministry of Finance of the Republic of Zambia has announced a consent solicitation to holders of its US$750 million at 5.375%,” the statement said.
“… to request the suspension of debt service payments for a period of six months from 14 October 2020, effectively covering the upcoming three coupon payments due on 14 October 2020, 30 January 2021 and 20 March 2021 on the respective notes.”
Effects of COVID-19
The statement further said Zambia is confronted with a very challenging macroeconomic and fiscal situation, which has been made worse by the COVID-19 crisis. This has severely affected the country’s public finances.
“A combination of declining revenues and increased unbudgeted costs caused by the COVID-19 pandemic have resulted in a material impact on the government’s available resources to make timely payments on its indebtedness, leading to increasing debt-servicing difficulties,” the statement said.
“This is the reason why the Republic of Zambia has taken the decision to apply for the G20 Debt Service Suspension Initiative in August 2020 and is requesting similar debt service suspension from its commercial creditors, including its noteholders.”
Request for relief
Zambia is engaging the International Monetary Fund (IMF) to secure financial assistance within a programme of reforms that would help in stabilising the macroeconomic outlook of the country.
“In this context, the government is committed to finding a consensual and collaborative resolution to the debt sustainability issues it is facing.”
Zambia’s Ministry of Finance has invited all holders of direct and guaranteed external commercial obligations, including the notes, to a virtual presentation for investors on 29 September.
Fred Dzakpata
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