Zambia’s newly-formed creditor group is encouraging the government to bring a planned debt overhaul under the scope of an International Monetary Fund bailout, to help put the nation’s public finances on a sound footing.
The government in Lusaka should vet its reform plans with the Washington-based fund and unlock aid to help finance projects to support an economic recovery, according to a representative of investors holding about a third of the nation’s dollar bonds.
Talks between Zambian officials and the IMF started on Monday after a request for emergency funding was sidelined due to concern over the sustainability of debt.
The government has hired Lazard Ltd to advise on its debt that’s set to exceed 100% of economic output.
“You want to see a situation where the government is emerging from a crisis, not kicking the can five years down the road,” Rafael Molina, a managing partner at the creditor group’s adviser Newstate Partners LLP, told Bloomberg.
Molina declined to comment on the parameters or targets of a potential restructuring.
Zambia has about $11 billion in external debt that may be renegotiated, including $3 billion of Eurobonds.
A $750 million note is set to mature in Sept. 2022 while $56 million in interest will fall due on July 30, according to data compiled by Bloomberg.
The notes trade at about 53 cents to 54 cents on the dollar, indicating market expectations for bondholders losing about half the value of their investments