Zambia Finance Chief aims for debt-restructuring deal this month
Zambia’s finance minister is aiming to reach a debt-restructuring deal with the country’s creditors this month, an agreement that’s been in the making for more than three years.
There has been growing optimism that Zambia could clinch a deal this week as international finance chiefs meet in Paris at the Summit for a New Global Financing Pact, hosted by French President Emmanuel Macron.
“The debt restructuring engagements with creditors have also moved considerably well,” Situmbeko Musokotwane said in comments published Tuesday in the annual report of the Paris Club. “The government remains positive that negotiations with official creditors would be concluded by June 2023.”
The country’s official creditors are close to making a debt-restructuring offer to the southern African nation, an official at the Paris Club said earlier this week. Zambia’s currency, the kwacha, rose almost 12% on Tuesday on expectations it’s on the verge of reaching a deal.
A deal would be the first to provide significant relief under the Group of 20’s so-called Common Framework, created in 2020 to help low-income countries reorganize debts they could no longer service amid the pandemic. The plan brings together traditional creditors of the Paris Club with new ones like China, now the biggest bilateral lender to developing nations.
Negotiations over debt restructuring have been hobbled, however, by disagreements between China and Paris Club members on how some loans should be treated.
The International Monetary Fund on Tuesday said signing a memorandum of understanding with official creditors would unlock an $188 million overdue payment from the fund.
“We are very encouraged by the significant progress being made in discussions between official creditors and Zambia on a potential debt treatment,” an IMF spokesman said in response to questions. “We expect an agreement could be reached within a few days, which would allow the executive board to consider the first review of the fund-supported program within a few weeks.”
Any deal among creditors would still need the Zambian government’s approval to break the long-running delay in restructuring debts since its default in 2020. The government said in October that it was seeking to restructure $12.8 billion in loans, although it’s unclear what the total will be after negotiations.
