Following fruitful discussions in Paris, Zambia has successfully reached an agreement to restructure its debt. President Hakainde Hichilema of Zambia participated in an international finance summit held in the French capital this week.
Under the terms of the agreement, Zambia’s creditors have consented to rescheduling $6.3 billion, which includes $1.3 billion in arrears. Similarly, private sector entities are expected to follow suit and restructure the $6.8 billion owed to them.
Zambia, a southern African nation, faced a debt default in 2020 amidst the COVID-19 pandemic, becoming the first African country to experience such a situation. This debt restructuring agreement is the culmination of years of discussions between Zambia and its creditors, as the country’s external debt stands at $18.6 billion.
Previously, the United States had accused China, Zambia’s largest creditor, of delaying negotiations. However, Beijing refuted these allegations. Notably, out of the $6.3 billion owed to government entities, $4.1 billion was specifically owed to the Export-Import Bank of China, according to a French official.
France’s Finance Minister, Bruno Le Maire, expressed satisfaction with the debt restructuring progress and highlighted China’s willingness to participate in these efforts. In an interview with Radio France Internationale on Thursday, Le Maire mentioned, “We were keen to restructure the debt, and we wanted to do it in collaboration with our Chinese partners. The presence of China’s First Minister, Li Qiang, is a clear indication of China’s commitment to participating in these debt restructurings.”
As per the agreed terms, Zambia’s debt will be rescheduled over a period exceeding 20 years, with a three-year grace period during which only interest payments will be due.
This debt restructuring will also enable Zambia to receive the subsequent tranche of $188 million from the International Monetary Fund, which forms part of the $1.3 billion package approved in August 2022.