Zambia is pushing hard to conduct the restructuring of almost $15 billion of outward debt in the first quarter of 2023. It is in active engagement with its most extensive bilateral creditor China, Zambia’s finance minister stated in an interview at the Reuters NEXT conference.
Zambia defaulted on its sovereign deficit in 2020. The current government took power last year and has been searching to change its loans and rebuild an economy devastated by mismanagement under previous administrations and the coronavirus.
In August, Zambia won International Monetary Fund (IMF) support for a $1.3 billion three-year loan program to help it change debts which the government declared stood at $14.87 billion at the end of June 2022.
Moreover, he stated that Zambia’s Finance Minister, Situmbeko Musokotwane, informed Reuters that China had pursued clarification from the Zambian government and the IMF on their debt contract.
He said that China wants more clarity on the IMF assumptions on which the loan program is established since these are meant to create the basis of the restructuring negotiations between Zambia and all its creditors.
China’s Comments
Analysts witness Zambia’s much-delayed debt restructuring as a test case for what should be a spate of defaults in more impoverished countries that have borrowed heavily not only in the capital markets but furthermore from countries including China.
At the end of 2021, Chinese creditors accounted for nearly $6 billion of Zambia’s external debt, which was $17.27 billion.
The Export-Import Bank of China conveys all Chinese creditors in their restructuring negotiations with Zambia, Musokotwane spoke. These include commercial banks, the Industrial & Commercial Bank of China (OTC: IDCBY), Jiangxi Bank, and China Minsheng Bank.
Furthermore, China’s Ministry of Foreign Affairs did not directly reply to a request for comment.
Musokotwane added that private creditors collaborated well in debt relief discussions and had a bondholder meeting this week.
