confidentially speaking
The Africa Confidential Blog
What Zambia’s new deal means for countries in debt traps
Blue Lines
The deal to restructure over US$6 billion of Zambia's foreign debt is a triumph for President Hakainde Hichilema, under whose government the country will save billions in repayments if, as is now much more likely, he secures a second term.
Much kudos should go to Finance Minister Situmbeko Musokotwane, who deftly navigated pressures from a smorgasbord of rival creditors. Getting creditors led by China and France to agree the core terms – extending maturities over some 20 years with a three-year grace period – had looked impossible.
What does this mean for 70 low-income countries owing some $326bn? Zambia's breakthrough, with all its national specificities, is not a blueprint. It reinforces the case for global financial reform, the subject of President Macron's conference in Paris where the deal was announced.
Delegates in Paris struggled to agree on first principles: western treasuries are cutting funds to developing economies; many middle-income countries are chary about the IMF and World Bank doing much more on debt and infrastructure; China's offer of more finance for the multilateral banks is premised on taking a bigger stake in them, and that's anathema to Washington. To break that logjam will require negotiating skills of the kind that established the UN system, over 75 years ago. And they are in short supply, like capital in developing economies.