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

Legal losses

Constitutional wrangles worsen, the corruption trials falter but the economy picks up

The proposed new constitution would reduce presidential powers and entrench fundamental rights and freedoms (AC Vol 46 No 3). President Levy Mwanawasa doesn't like it - even though...


Watching Big Brother

As politicians fall like ninepins to the Anti-Corruption Task Force, the President turns to TV

When Cherise Makubale beat eleven contestants this month in Big Brother Africa, an international 'reality television' show avidly followed in Zambia, President Levy Mwanawasa immediately appointed her a...


Creditors fume as the beat goes on

After the default, the bondholders and Chinese creditors are jostling for priority but secrecy and local politics are blocking a credible solution

National politics and geopolitics are set to scupper any attempts to resolve the crisis over Zambia's more than US$12 billion foreign debt. There is little sign that President...


No immunity

Zambia's parliament voted unanimously on 16 July to lift ex-President Frederick Chiluba's immunity from prosecution. A criminal investigation will now open into those said to have benefited corruptly...


Copper-bottomed but leaky

Booming mines and farms, and a government beset by talk of corruption and strange legal decisions

Fuelled by rising world demand for copper and cobalt and by a bumper maize harvest, the economy is growing at a roaring 7.5%. Yet President Rupiah Banda, who...