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Saturday, December 3, 2022

Zambia’s bond holders slam IMF debt relief target as ‘arbitrary’

Economy Zambia’s bond holders slam IMF debt relief target as ‘arbitrary’

Reuters reports that Zambia’s international bondholders have criticised the International Monetary Fund’s debt restructuring framework as “arbitrary” and for excluding the country’s domestic debt, sources involved in the process have told Reuters.

Zambia has been in default for almost two years and an IMF Debt Sustainability Analysis published last week called for its debt-service-to-exports ratio to be cut to a 140% “threshold” from 153% quickly and to 84% by 2027.

“Now, all of a sudden, they have an arbitrary 84% number,” said Kevin Daly, head of emerging market debt at Abrdn, who chairs a committee of bondholders estimated to hold around 45% of Zambia’s $3 billion worth of international market debt.

“How did you arrive at that number? It’s such a different figure than the (140%) threshold,” he told Reuters, calling on the IMF to meet with bondholders, who have complained of being left out of the loop as the IMF and bilateral creditors worked out a plan.

IMF spokespeople did not immediately respond to a request for comment.

Zambia’s much-delayed debt restructuring is seen by analysts as a test case for what are expected to be a spate of defaults in poorer countries that have borrowed heavily not only in the capital markets but also from countries including China.

David Malpass, president of the World Bank, the IMF’s sister organisation, said last week that “a deep debt reduction of 45% in net present value (NPV) terms… is essential.”

Relief of that magnitude “would not be acceptable (to) creditors”, including Chinese lenders, Daly said.

He declined to say what other bondholders would agree to, but said that from his perspective, “If it was something more in the… 20-30% range, I think that would be acceptable.”

A bond recovery value of $65 to $75, with an exit yield of 11-12% was “realistic”,” he said.

Bondholders are also unhappy that $11.6 billion of local currency debt, $3.2 billion of which is owned by foreign investors, is being excluded from the restructuring, a second source involved in the process said.

The person, who is familiar with the committee’s position but spoke on the condition of anonymity, said it implied that such debt would effectively then have precedence over the Eurobonds, which are governed by international laws.

He also questioned whether it would be right to include local currency debt not subject to restructuring in the debt targets, as it “squeezes the amount of debt service that’s available to service external debt.” Still, he said, bondholders were “mindful” that restructuring local debt could cause issues in Zambia’s banking sector.

19 COMMENTS

  1. The PF and lungu legacy…………

    How can you be boasting about unprecedented development when you have plunged the country into a deep financial crisis ????

    Just goes to show how some people are totally ignorant about economics……..

    As far as they are concerned, it is unlimitless mana from heaven……….

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    • You don’t understand what you read. You were in a hurry to be number one to post a comment. What you wrote does not make sense to what is written in this News article.

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    • William Banda, Spaka understood what he was talking about. The issue concerns that US 30 billion that PF buried Zambia under with. Now the country has to go the IMF to help it secure its position, and the bond holders are not happy because as bad as the terms of the IMF deal, they want them to be worse for Zambia. Together with Satan and Lungu, they caught Zambia in a debt trap, and now they want to come in for their pound of flesh.

  2. We were told the IMF loan will restructure the Zambian debt and fix the economy.
    What are we dealing with now?
    Local Kwacha debt will still be eating away on the money to pay international Dollar creditors. Foreign and domestic debt should have received same preference.

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  3. Kikikikiki Kalaba and modern day slavery….the Lumbani Madoda praise singers thought shishi will go directly into their pockets…it turns its just on paper and Zambian was given a very bad deal no it never worked with Lungu because Lungu was negotiating for a better deal….I told shiiit it about to hit the ceiling….watch what’s happening in….don’t mess with the IMF….soon you will be queing for bread….don’t say I didn’t warn you….one sided deal definitely it won’t grow the Zambian economy…forcing things…

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  4. Rush rush rush. Everything rushed is dangerous and the current government thought it was gonna be easy and rosy.
    Like Mmembe has rightly put it. This will end in tears.
    We have a chimbwi with no plan.
    Debt is debt, whether shrouded in restructuring the existing debt or whatever.
    I can only echo Mmembe’s sentiments ” this my fellow citizens, gonna end in tears”. The fixer had zilch plan. Zambia bagoleka.

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    • I don’t think you know what you saying. In fact the imf is doing Zambia a fever by making these bond holder for taking a risk lending to a drunk like Lungu and now they want to cry wolf. They took the risk on Lungu and it’s time to loose money

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    • This Thorn in the a$$ – echoing Fred Mmembe’s sentiments …hahaha…he is truly hoodwinking a lot of weak lazy minds like yours.

    • Kikikikiki, it’s because your IQ is very low. How can you possibly get it?
      Zambia must do itself a favor by having a president who has guts to tell the truth and who thinks of a 1000 ways to fixing an economy. Thinking that the state capturers IMF has a favor for you is low class thinking. He will spend his entire tenure trynna restructure the debt by getting more debt. He has zilch home grown solutions to fix the economy. We have gold, we have mines given away freely and you yap about favors here. It’s kinda having a fixer getting fixed.
      Our gold and copper can do us a real favor to get us out’a debt but you have a leader doing the same old s*it the previous govt was doing, borrowing and more borrowing to fix a debt. There debt was even better than from punkas like IMF. Debt won’t…

    • My little nigga tarino. It turns out that Fred on a one to one comparison has more substance than your god ‘baally’. Although both of them are tax evaders Mmembe’s speeches are full patriotism and objectivity compared to the substanceless, muzungu anikonde, vindictive, divisive, subjective, hypocritical and void fixer. Do you know who I am talking about? Viola! Good guess my nigga.

  5. As # 6.1  TheEngineer says……….

    These bond holders just have to put up and shut up…………

    They took a chance on a corrupt drunkard like lungu…………

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  6. It really beats why the PF still have the gutts to even argue on this score. You worms ruined this country. All this started when MCS came to the fore, that is when all the scum popped out because they were his kind. The man had never been straight before, he plundered the merzaf funds. He was a know It all. Too loud for his own good. You cant have one man in a single lifetime that knows everything under the sun.
    We’re in this mess because of that same tribal man

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