Zambia, bilateral creditors agree debt rework memorandum of understanding

MARRAKECH, Morocco, Oct 14 (Reuters) - Zambia has agreed a memorandum of understanding (MoU) with its bilateral creditors on restructuring about $6.3 billion of debt, almost three years after the southern African country defaulted, the finance ministry said on Saturday.

Zambia was the first African country to default on its debt in the pandemic era and its restructuring process saw it agree broad terms to rework the debt with official creditors including China and members of the Paris Club of creditor nations in June.

"Each official creditor will now begin their internal process to sign the MoU. Following the signing of the MoU, the terms will be implemented through bilateral agreements with each member of the OCC (Official Creditor Committee)," a ministry statement said.

The agreements will include an average extension of debt maturities of more than 12 years, with interest rates set at 1% during the next 14 years and up to 2.5% after that. There is a mechanism to increase payments if Zambia's economy performs better than expected.

Zambia will pay about $750 million in the next decade compared to almost $6 billion that was due to official creditors before the debt restructuring.

"The next step is to secure a comparable agreement with our private creditors," Zambia's finance minister, Situmbeko Musokotwane, said.

Zambia is committed to remaining in arrears to its commercial external creditors, the ministry said, until it secures a debt deal with comparable terms to the official creditor agreement.

This article originally appeared on Reuters