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

Towards a one-party state

President Sata wants the political control that eluded him in 2011 and also the parliamentary majority that will allow him to change the constitution

The governing Patriotic Front’s tactics are far from original. The PF’s attempts to dominate the media and gaol opponents hark back to the era of the one-party state...


Judges to rule on Lungu's future

Opposition MPs accuse the President of putting an unqualified judge on the Constitutional Court

The Constitutional Court was ordered to resume hearings on whether or not President Edgar Lungu may serve a third term of office on 30 January. But Court president...


Banda redraws party lines

The MMD is in dangerous disarray. The UPND is attracting defectors and popular support, even from Banda himself

Former President Rupiah Bwezani Banda’s support for the United Party for National Development is weakening his own Movement for Multiparty Democracy. To oppose the governing Patriotic Front (PF),...


The PF picks two candidates

The bitter split in the governing party is now before the courts. Yet the official candidate, whoever it is, may still have the best chance of winning

A national conference so turbulent that the police fired shots over the heads of the crowd has ended with both factions of the Patriotic Front putting forward their...


Down the mine, down the drain

Political troubles were overshadowed on 25 January, when Anglo American announced that it was pulling out of the Copperbelt less than two years after reinvesting there. Copper had...