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Zambia has asked its international commercial creditors for a 6-month debt deferment due to the serious impact of the coronavirus pandemic, a senior government official told Agence France-Presse (AFP) on Wednesday, September 23.
The government this week sought a suspension of debt service payments for 6 months from October 14 on 3 Eurobonds because its finances had been “severely affected,” it said in a statement.
The country is in “a very challenging macroeconomic and fiscal situation,” it added.
A finance ministry statement said Zambia had decided to apply for the G20 Debt Service Suspension Initiative and had sought similar relief from its commercial creditors.
Africa’s second largest copper producer has also been hit by dwindling revenues due to a decline in metal prices.
“The impact of COVID-19 has been severe, hence seeking the suspension of payments,” Secretary for Treasury Fredson Yamba told AFP.
Zambia had contracted 3 Eurobonds totaling $3 billion – funds that were mainly channeled towards infrastructural development such as roads construction.
The landlocked southern African country has already defaulted on repayments of some loans acquired for several construction projects, including Chinese-funded ones, resulting in some being suspended or abandoned.
“This is confirmation that Zambia is broke,” said independent analyst Mambo Haamaundu. “Our treasury is depleted and now we have to ask the investors to give us time.”
Lenders will be closely following Finance Minister Bwalya Ng’andu’s 2021 budget speech on Friday, September 25.
“The standstill request is not surprising given the substantial external debt service schedule the government is facing,” said Mark Bohlund of REDD Intelligence Research, in a note.
Until recently, Zambian authorities had brushed aside growing concerns over the actual size of its external public debt, which had been putting pressure on the value of government bonds.
In July, President Edgar Lungu requested debt relief and cancellation from China due to the economic impact of the coronavirus pandemic. – Rappler.com