Zambia’s Creditor Group Sees $6.3 Billion Debt Deal in Days
Progress on talks has been slow since June deal-in-principle
Group plans MOU on $6.3 billion of debt by end of IMF meeting
Zambia’s official creditor committee plans to sign a memorandum of understanding to restructure $6.3 billion of debt by the close of the International Monetary Fund’s annual meeting next week, two people familiar with the matter said. The nation’s dollar bonds rallied.
The government has made slow progress in talks since June, when it reached a deal-in-principle with the committee co-led by China and France. The agreement would see the interest rates cut to as low as 1% and the loans only repaid in 2043, with a 40% reduction in net-present value of the debt.
Zambia, which became Africa’s first pandemic-era sovereign defaulter in 2020, has struggled to come to an deal with creditors. Earlier this year, the IMF withheld a near-$190 million disbursement because of delays in the group agreeing to debt relief. China is by far Zambia’s biggest bilateral creditor.
While they are targeting to sign the pact next week, technical aspects are still being discussed and it may not be possible to conclude in time, one of the people said, who asked not to be identified as the information isn’t public. The nation will finalize and execute the memorandum of understanding by the end of the year, Finance Minister Situmbeko Musokotwane said Sept. 29.
Debt Distress
Emerging market debt distress and China’s role as a major lender, will be a key topic at next week’s IMF meetings in Marrakesh, Morocco. Some of Sri Lanka’s official creditors are also pushing to reach their own deal ahead of the gathering to restructure its liabilities without the participation of China. The IMF is helping to push a broader “roundtable” to hammer out the way forward on handling debt treatments between the Paris Club, China, private creditors and others.
Zambia’s July 2027 dollar bonds jumped to their highest in two weeks and were quoted at 55 cents on the dollar after reports of the imminent deal.
The Paris Club, an informal group of mostly developed countries of which China is not a member, last week expressed confidence that an agreement will be signed by the IMF’s meetings, one of the people said. The club didn’t immediately respond to an email seeking comment.
Zambia also still needs to reach a restructuring deal with commercial lenders, including the holders of $3 billion in eurobonds, that provides comparable treatment to what the official creditors agreed to.
This article originally appeared on Bloomberg.