Ratings agency Standard & Poor's (S&P) declared Zambia's government in default on Wednesday, October 21, after the African nation missed an interest payment.
The mineral-rich southern African country has seen its debt surge to nearly $12 billion this year as commodity prices have fallen amid the coronavirus pandemic.
The government had sought relief from its creditors but after missing an October 14 payment on its April 2024 Eurobond, S&P cut the foreign credit rating to "SD" from "CCC-," according to the statement.
The agency noted that the Zambian government announced "it would be unable to make payments on upcoming external commercial obligations due to liquidity pressures that had been compounded by the pandemic."
The nation's debt already represented around 80% of gross domestic product by the end of 2019, according to the African Development Bank (AfDB).
The Zambian government last month asked for a 6-month debt repayment holiday on 3 Eurobonds due to the economic impact of coronavirus restrictions, and announced plans to apply for debt service suspension from creditor nations under a G20 initiative.
S&P noted that half the government's debt is owed to official creditors, including export credit agencies, while over $3 billion or 25% "is owed to various Chinese lenders including policy banks – China Exim Bank and China Development Bank – as well as private Chinese banks."
Even after a debt restructuring, S&P said the nation's finances are challenging "and fiscal consolidation has been further delayed by complications stemming from the pandemic." – Rappler.com