Major creditors willing to discuss 2020-defaulter Zambia’s debt restructuring

LUSAKA (Reuters): Zambia’s Finance Minister Situmbeko Musokotwane said on Wednesday that its major creditors were willing to discuss debt restructuring, as part of efforts to draw a line under a debt crisis that spurred Africa’s first pandemic-era default.

The Southern African copper producer defaulted in November 2020, when an economic downturn triggered by COVID-19 lockdowns and travel restrictions exposed how overleveraged the State had become during the boom years.

It now seeks relief on its more than $ 17 billion of external debt to get its borrowing under control. On Thursday it will hold its first meeting with its international creditors – which include a plethora of Chinese entities, Western banks, sovereign bilateral lenders and multilateral institutions.

“The good news is that now everyone is on board to start talking about debt relief,” Musokotwane told a joint news conference with IMF Deputy Managing Director Antoinette Sayeh. “We are now getting closer to debt relief (and) getting closer to the IMF program.” He added that he did not think the creditor discussions would take more than a month and that he saw August-September as a tentative timeline for starting an IMF program.

IMF Deputy Managing Director Antoinette Sayeh described September as “optimistically possible”, and she anticipated that creditors would be very encouraged by Zambia’s efforts to impose discipline on public spending, which include cutting a subsidy on the consumption of fuel and making pledges to slash its budget deficit.

“We are very encouraged by the fact that the creditors are now going to be beginning their deliberations beginning tomorrow... on the nature of the debt relief they will provide Zambia,” Sayeh said.

Zambia reached a staff-level agreement on a $ 1.4 billion three-year extended credit facility with the IMF in December and needs to finish bilateral negotiations to secure the funding.