Jump to navigation

Zambia

Debt deal teeters on the brink of collapse

G20 creditor committee rejects revised Zambia agreement, potentially deterring other countries from applying and putting the relief programme at risk

The threats to Zambia's painstakingly agreed debt restructuring deal could be the last nail in the coffin on the Group of 20's Common Framework debt relief programme.

Last week's decision by the Official Creditors Committee to reject a revised deal on the grounds that it breached the 'comparability of treatment principle' – where no creditor should receive more favourable treatment than the others – and did not provide enough debt relief has sent the government in Lusaka and bondholders back to the drawing board.

'The OCC is inexplicably blocking the path to restoring Zambia's debt sustainability by dictating terms it has no right to define,' said bondholders in a statement, adding that 'the OCC's intransigence risks inflicting severe damage to Zambia's economy and poses an existential threat to the entire viability of the Common Framework, impacting the emerging markets asset class.'

The bondholders were set to take a bigger upfront haircut than China – Zambia's largest bilateral creditor – which has agreed to restructure $4.1 billion.

Finance Minister Situmbeko Musokotwane has complained that the delays have hit economic growth, weighed on local financial markets and increased the cost of living.

Praising President Hakainde Hichilema's government for its role in brokering the agreement, the International Monetary Fund had previously said it would use the deal as a template for other nations such as Ethiopia and Ghana that are also seeking debt restructuring under the G20's Common Framework.

However, no country has brokered a debt relief deal based on the G20 programme since its creation in 2020, and Zambia's travails are likely to further discourage other debt-distressed African countries from following Lusaka's path.



Related Articles

Presidential runners

Movement for Multi-party Democracy (MMD): formed 1990, governing since 1991. Support: Copperbelt and Bemba people, trades unions; endorsed by Dean Mung'omba's Zambia Alliance for...


Beijing digs deeper into Zambian mines

Oppositionist Michael Sata’s rhetoric against China is not slowing down Chinese investment plans ahead of Zambia’s national elections, which are due in 2011. Chinese companies operating Zambian mines will now have...


Ex-President Banda switches horses

The political landscape is changing and President Michael Sata’s Patriotic Front faces a new opponent. Having lost faith in his own party, the Movement for Multiparty Democracy, former...


Wing and a prayer economics

Battered by rising debt and deficits as copper mines close, the government searches desperately for alternatives

Despite looming elections, a sliding copper price, critical power shortages, the world's worst performing currency and record borrowing costs, Finance Minister Alexander Chikwanda has described his goal of...


Jail to the chief

Personal and political rivalries are helping ex-President Frederick Chiluba's defence

Zambia's constitution provides that the Director of Public Prosecutions cannot be sacked or removed from office until his conduct has been investigated by a tribunal of judges. So...