- Zambia is seeking to restructure $12.8 billion debt in loans held by creditors
- The creditors’ committee, which is chaired by China and France, needs to sign a memorandum of understanding with the Zambian government on the restructuring
- The African Development Bank, International Monetary Fund, and World Bank have committed to the restructuring process
Harare-Zambia is a step closer to finalizing its long-awaited debt-restructuring agreement with its official bilateral creditors. The nation’s treasury secretary, Felix Nkulukusa, recently announced that the creditors, which include Chinese state-owned banks and eurobond holders, are set to meet on April 18th, after the resolution of several key roadblocks.
The debt to be revamped is $12.8 billion in loans held by creditors. This overhaul will involve working with traditional bilateral creditors and bondholders, as well as new lenders, including China. The negotiations are viewed as significant, as they will determine how new lenders can work in tandem with multilateral development banks (MDBs) to restructure liabilities for low-income nations struggling to service their debts at a time of rising interest rates.
The process has been challenging due to several obstacles that the country’s officials needed to overcome. One of the significant obstacles was the involvement of foreign residents holding the nation's local-currency bonds.
The other was the multilateral development banks' (MDBs) reluctance to share the burden with bilateral creditors, which caused a significant fracas.
Despite these obstacles, Zambia's officials remain optimistic. The African Development Bank (ADB), International Monetary Fund (IMF), and World Bank have committed to the restructuring process. This gesture indicates that the MDBs are willing to share the burden with bilateral creditors, which was one of the main issues.
Moreover, the amount of domestic debt held by foreigners reduced significantly, with foreign residents holding the nation's local-currency bonds falling from $3.3 billion to $2.1 billion.
Nkulukusa believes the nation is closer than ever to finalizing the restructuring deal, stating that most of the outstanding issues had been resolved. However, it is uncertain whether the creditors’ committee will reach a consensus that has already taken months since the body was formed in June.
The creditors' committee, which is chaired by China and France, needs to sign a memorandum of understanding with the Zambian government on the restructuring. Although there has been progress made, there’s still work that needs to be done.
The treasury secretary remains hopeful that discussions at the committee meeting will move into the next stage of restructuring, instead of questioning the underlying assumptions and parameters in the debt-sustainability analysis.
He also expressed optimism that the private creditors and bondholders will come on board once official creditors sign the memoranda of understanding. While much remains uncertain, it is evident that key stakeholders remain determined to strike a deal that benefits all parties involved.
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