Finance Minister Dr. Situmbeko Musokotwane has called upon Zambia’s official creditors to make progress in restructuring the country’s debt during their upcoming meeting. This plea comes as Zambia continues to face challenges in completing its long-delayed debt rework process following its default in 2020.
Zambia is aiming to restructure approximately $12.8 billion of external debt, but it has encountered concerns from its major creditors, including China, its largest official bilateral creditor, and international bondholders. These creditors are apprehensive about the extent of debt relief that may be required.
In a statement released by the ministry, Dr. Musokotwane expressed the urgency of the situation and appealed to the Official Creditor Committee to make substantial progress in their deliberations. He emphasized that resolving the debt overhang swiftly is crucial to accessing the next tranche of financing from the International Monetary Fund (IMF). The IMF had previously stated that a $188 million disbursement from a $1.3 billion support loan to Zambia is contingent upon the government reaching an agreement with its creditors.
The President of Zambia, Hakainde Hichilema, revealed that French President Emmanuel Macron has expressed the desire for the debt rework process to be completed before France hosts the Summit For a New Global Financial Pact in June. France, alongside China, co-chairs Zambia’s Official Creditor Committee.
The protracted nature of the debt restructuring process has taken a toll on Zambia’s economy and the livelihoods of its citizens. The Kwacha, has weakened by 13% against the U.S. dollar in the past six weeks, erasing a 20% gain from the preceding three weeks when investors were hopeful that the debt restructuring was nearing completion.
Musokotwane highlighted the adverse impact of the uncertainty surrounding the restructuring process on the currency, making it challenging to attract much-needed foreign investment. The statement did not specify the date for the next meeting of the official creditors.
Overall, Zambia is facing significant economic challenges as it strives to overcome its debt burdens. The Finance Minister’s appeal for progress in debt restructuring reflects the urgency of the situation and the need to find a resolution promptly to unlock IMF financing and stabilize the country’s economy.
Chinese creditors really need to come on board to assist us get out if this mess but what they are saying is don’t go through IMF but rather approach them directly. I know the repayment/ debt restructuring plan will be agreed on soon.