Zambia, which became Africa’s first pandemic-era sovereign default late last year, said on Friday, February 5, it had requested a restructuring of its debt under a new framework supported by the Group of 20 major economies.
The precarious debt burdens of a number of African nations have worsened due to the economic fallout from the COVID-19 pandemic. Zambia did not make payment of a coupon on one of its dollar bonds in November, sending it into default.
The G20 initially offered the world’s poorest countries temporary payment relief on debt owed to official creditors under its Debt Service Suspension Initiative (DSSI). In November, it also launched a new framework designed to tackle unsustainable debt stocks.
Zambia is due to begin negotiations to establish a relief program with the International Monetary Fund (IMF) next week. And in its statement, the finance ministry said debt treatment under the framework would be based on the debt sustainability analysis prepared in collaboration with the IMF.
All G20 and Paris Club creditors are expected to coordinate their engagement with Zambia via the common framework, the statement said.
Finance Minister Bwalya Ng’andu reiterated his country’s commitment to transparency and equal treatment of all creditors during the restructuring process.
“Our application to benefit from the G20 Common Framework will hopefully reassure all creditors of our commitment to such treatment,” he said.
Analysts said the request had been expected and was a positive move.
“The key remains making progress towards resolving the default and moving towards an IMF program with a credible macro framework,” said Raza Agha, head of emerging markets credit strategy at Legal & General Investment Management.
Zambia’s sovereign dollar bonds were little changed at just over 50 cents in the dollar.
Last week, Chad became the first country to request debt restructuring under the new framework. Ethiopia said it would also use the G20 initiative.
Investors have been trying to gauge how using the framework, which foresees participation by private creditors, could affect access to international capital markets.
Credit rating agencies have warned that even delaying coupon payments on Eurobonds would constitute a default.
“As the G20 works out this process, it’s essential that they compel the private sector to participate,” said Eric LeCompte of Jubilee USA, which lobbies for debt relief for poor nations.
Zambia’s $3 billion in outstanding Eurobonds is not its only debt. It owes $3.5 billion in bilateral debt, $2.1 billion to multilaterals, and $2.9 billion to other commercial lenders.
It owes around $3 billion to China and Chinese entities.
Some of Zambia’s private creditors have said a lack of transparency regarding debt owed to China has created an obstacle to their talks with the government.
China has agreed to participate in the G20’s common framework, which observers expect will require creditors and countries seeking restructuring to be more forthcoming with information. – Rappler.com