"Zambia wins debt relief, setting precedent for stressed nations"

" Zambia wins debt relief, setting precedent for stressed nations \r\n\r\nZambia reached an agreement in principle to restructure $6.3 billion of debt with bilateral lenders, setting a precedent for a growing list of countries struggling to service their liabilities.\r\n\r\nThe deal was announced by a French official Thursday, and later confirmed by the southern African nation\u2019s finance ministry.\r\n\r\nOn Twitter, Zambian President Hakainde Hichilema called the agreement \u201ca significant milestone in our journey towards economic recovery and growth.\u201d\r\n\r\nThe accord marks the first major relief won by a developing country under the Group of 20 nations\u2019 Common Framework that brings the traditional creditor nations of the Paris Club around the same negotiating table with China and India.\r\n\r\nDetails remain unclear, beyond that the creditors led by China and France agreed to extend the maturities on their loans over some 20 years, with a three-year grace period, according to the French official.\r\n\r\nCalling the pact a \u201csignificant milestone\u201d for the Common Framework, IMF Managing Director Kristalina Georgieva said creditors agreed \u201cdeep debt relief for Zambia.\u201d\r\n\r\nIt specifies both a baseline and a contingent treatment that would be automatically triggered if the assessment of Zambia\u2019s economic performance and policies improves, she said in a statement, without providing more detail.\r\n\r\n Urge Conclusion \r\n\r\nUS Treasury Secretary Janet Yellen. who has long sought solutions on the debt issues plaguing Zambia and other emerging nations, welcomed the consensus.\r\n\r\n\u201cDuring my trip to Zambia earlier this year, I saw firsthand how the weight of default and a stalled debt-restructuring process can bring suffering to ordinary families and hold back economic growth,\u201d she said in a statement. She urged creditors to finish restructuring the debt quickly.\r\n\r\nThe parties are expected in coming weeks to sign a memorandum of understanding for the debt treatment that Zambia\u2019s finance ministry said included \u201csignificant maturity extensions and reduction in interest rates.\u201d\r\n\r\nThis could lead the way for other nations \u2014 including Ghana, Sri Lanka and Ethiopia \u2014 locked in negotiations with creditors from China, the Paris Club and bondholders. More than 70 low-income nations face a collective $326 billion burden, with more than half of them already in or near debt distress, according to the IMF.\r\n\r\n\u201cThis agreement marks a crucial milestone in Zambia\u2019s ongoing efforts to strengthen its economy and improve the quality of life for its citizens,\u201d Finance Minister Situmbeko Musokotwane said in a statement. \u201cWe will now work to achieve a swift resolution with our private creditors and deliver opportunity and economic stability to the Zambian people.\u201d\r\n\r\nZambia\u2019s currency has rallied 12% this month in anticipation of the agreement, the biggest gain among 150 currencies tracked by Bloomberg. Its eurobonds have delivered a performance only exceeded by El Salvador and Argentina.\r\n\r\nA meeting to mark the agreement will be attended by French President Emmanuel Macron, Hichilema and Chinese Premier Li Qiang on the sidelines of the Summit for a New Global Financing Pact in Paris, the French official added. It\u2019s a major step in the process of ending the default of the first African nation to do so in the pandemic era, and will unlock a $188 million disbursement from the IMF.\r\n\r\nZambia in October said it was seeking to revamp $12.8 billion in external debt, and it\u2019s unclear if this amount has changed following negotiations in which China called for more relief from lenders such as the World Bank, and for some of its own debts to be excluded. Zambia owed about $6 billion to Chinese lenders, around one-third of its total foreign liabilities.\r\n\r\n Years of Waiting \r\n\r\nWhile the memorandum marks a major milestone, it is not legally binding and Zambia still must sign bilateral agreements with each creditor. It has also yet to conclude restructuring talks with holders of $3 billion in eurobonds, which had accrued more than $500 million in arrears by the end of last year. Other commercial creditors are likewise yet to strike a deal.\r\n\r\nThe memorandum with the official creditors includes a clause requiring comparability of treatment for Zambia\u2019s commercial debts, the French official said.\r\n\r\nIt gives Macron a concrete breakthrough at a summit he has convened in Paris to overhaul financing for the poorest countries that face the greatest funding risks. His administration was also a key proponent of the creation of the Common Framework to expand the Paris Club creditor group to include China in debt restructuring.\r\n\r\n Key Details in Finance Ministry Statement: \r\n \r\n \t Official creditors will provide a debt treatment contingent on Zambia\u2019s debt-carrying capacity at the end of the 38-month IMF-supported program approved in August \r\n \t The relief will be adjusted if conditions have improved enough to justify an upgrade from \u201cweak\u201d to \u201cmedium\u201d debt-carrying capacity, in which case principal reimbursements would be accelerated and interest payments increased \r\n "

"Zambia wins debt relief, setting precedent for stressed nations"

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