Zambia clinches deal to defer Chinese debt

Zambian President Edgar Lungu.

Photo credit: Dawood Salim | AFP

What you need to know:

  • The move to defer debt comes three months after Zambia's President Edgar Lungu asked his Chinese counterpart Xi Jinping for debt relief due to the economic impact of the coronavirus pandemic.

Zambia has secured a debt repayment holiday from China, a treasury official said Wednesday, days after the government was declared in default for missing an interest payment on its Eurobond.

Africa's second largest copper producer is one of China's prominent debtors, owing billions of dollars.

Secretary to the Treasury Fredson Yamba said payments due to the China Development Bank on October 25 has been pushed back for six months.

"The deferred interest payment is now payable on 25 April 2021 and the deferred principal (is) rescheduled over the life of the facility," Yamba said in a statement.

The move to defer debt comes three months after Zambia's President Edgar Lungu asked his Chinese counterpart Xi Jinping for debt relief due to the economic impact of the coronavirus pandemic.

Yamba did not disclose the amount that Zambia owes China but said that his government would engage with other creditors for similar arrangements.

Last month Zambia sought a six-month suspension of payments on three Eurobonds citing its "severely affected" finances.

Yamba said an interim agreement to defer payments would buy the country time to "focus efforts on completing its overall debt strategy aimed at restoring public debt sustainability." 

The mineral-rich country has seen its debt surge to nearly $12 billion this year as commodity prices have fallen amid the coronavirus pandemic.

The nation's debt already represented around 80 percent of GDP at the end of 2019, according to the African Development Bank (AfDB). 

The government had already defaulted on repayments of some loans taken out for construction projects, including Chinese-funded ones, resulting in some being suspended or abandoned.

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