Zambia creditors agree to restructure debt

Hakainde Hichilema.

Zambian President Hakainde Hichilema.  

Photo credit: Patrick Meinhardt | AFP


Zambia's lenders, including major creditor China, have agreed to restructure the country's public debt, officials have said, providing financial relief to the first African nation to default after the Covid pandemic.

In a tweet, Zambian President Hakainde Hichilema on Thursday said the country had "reached an agreement on a debt treatment with our official creditors", calling it a "significant milestone in our journey towards economic recovery (and) growth".

The agreement on $6.3 billion of Zambia's debt was confirmed by a French official on condition of anonymity, on the sidelines of a summit aimed at revamping the international financial system to better tackle climate change and poverty.

Zambia, Africa's biggest copper producer, with a population of nearly 20 million people, defaulted on its $18.6 billion external debt in 2020 but negotiations had stumbled over differences between China and Western creditors.

The United States had accused China of delaying the debt agreement.

The deal involves bilateral debts between Zambia and other countries, with the bulk -- $4.1 billion -- being its debt with China, the French official said, noting that the process among lenders had been "difficult".

Chinese Premier Li Qiang was among the world leaders attending the two-day summit hosted by French President Emmanuel Macron, with Hichilema in attendance as well.

The French official said private creditors, who are owed $6.8 billion, will have to "make a similar effort to what we have done".

Part of Zambia's external debt, which is held by the International Monetary Fund, the World Bank and multilateral development banks, cannot be restructured.

The country's total debt amounts to $32.8 billion, including $18.6 billion owed to foreign lenders.

"This unique and innovative agreement specifies both a baseline and a contingent treatment that would be automatically triggered if the assessment of Zambia's economic performance and policies improves," said IMF chief Kristalina Georgieva.

World Bank Group president Ajay Banga said the agreement "will help unlock private sector investment, restore growth and accelerate job creation in Zambia".

Zambia's debt soared under former president Edgar Lungu, who was criticised for borrowing huge sums to finance infrastructure projects during his six years in power before he lost elections in 2021.

In Lusaka, a source close to the presidency said the government had "yet to see the whole deal but so far this is good".

"It's something which is good and will allow the government to channel the resources to social sectors like... free education," the senior government official told AFP on condition of anonymity because he had no authority to comment on the deal.

US Treasury Secretary Janet Yellen, who is attending the Paris talks, added in a statement that she welcomed the latest development.

"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," she said.

African nations, already hit hard by the pandemic, faced more economic pain after Russia's invasion of Ukraine, with the conflict sending global food prices through the roof.

Public debt in sub-Saharan Africa reached 56 percent of gross domestic product last year, the highest since the beginning of the 2000s, the IMF said in an April report.

Borrowing costs in the region are three times higher than those of developed nations, the IMF said.