Zambia Creditors Meeting Tomorrow, Hoping to Resolve Debt Plan This Week

A source within the Paris Club of official creditors has revealed that creditors intend to propose a debt restructuring plan for Zambia this week.

Talks seemed to have stalled in April, when Chinese lenders said they would reconvene in May for debt talks. Two days later, Zambia announced it would send a debt restructuring plan to China. Since February, Chinese creditors have suggested that they are not responsible for the majority of Zambian debt; the US and International Monetary Fund have pointed to Chinese creditors holding $6.6 billion of Zambia’s debt, with an estimated $8 billion required to reinvigorate the economy. It appears that creditors have reached an understanding, unlocking the route to debt recovery.

Zambia became the first African nation since the start of the COVID-19 pandemic to default on its foreign debt, estimated at $17.3 billion, in 2020.

Zambia has sought various means to accelerate the process of debt restructuring, such as using the framework of the G20, co-chaired by Paris and Beijing, but the process has taken more time than hoped.

The Paris Club is a solution-finding, informal group for official creditors looking to aid countries struggling to repay debt. The Club will meet tomorrow, the day before an international Paris summit whose theme is innovative global financing to tackle climate change.

The anonymous Paris Club source said, “I think we have done our work at a technical level, now it’s a question of ironing out the last details and being ready to make an offer to Zambia”. The source said the Club was “hopeful we can make an announcement during the summit […] The president of Zambia will be there, the prime minister of China will be there, numbers of creditors from the Paris Club will be there, so hopefully we can be in a position to offer a debt treatment to Zambia.”

Hakainde Hichilema last month described the debt as “like a python around our necks, ribs and legs”. Regardless, much work has been successfully achieved in Zambia’s energy and mining industries in particular; debt restructuring would allow Zambia to unlock the IMF’s waiting aid plan, and open a new phase of more diversified investment, and allow Zambia’s Small and Medium Enterprise (SME) project to take off.

In April, Kristalina Georgieva, Managing Director of the International Monetary Fund, told the media that fresh assurances had been given that China supported debt restructuring during her visit to Beijing. The Paris Club Source said that creditors “are close to the finish line”.