Zambia Engaged in Negotiations for K81.3 Billion Commercial Debt Restructuring

Zambia is commencing negotiations to restructure K81.3 billion of commercial debt, marking a significant step in efforts to emerge from a three-year default period. Commercial debts are owed to various commercial creditors who provided goods or services within the country, as opposed to sovereign bonds which function as IOUs to creditors issued by the government in debt. This development comes after recent agreements between overseas holders of sovereign bonds, which President Hichilema described as “historic.”

Key figures within the government, including Secretary to the Treasury Felix Nkulukusa, have affirmed the country's commitment to engaging with creditors in good faith to reach mutually beneficial agreements.

Referring to private creditors other than bondholders, Secretary to the Treasury Felix Nkulukusa said ”We have already started negotiations and with some we are almost reaching there. The $3.3 billion is the money that we have to continue engaging (on) and we are engaging in good faith.”

The creditors include various state-owned Chinese banks, the African Export-Import Bank, and western bank Standard Chartered.

To begin the restructuring process, Zambia must strike bilateral agreements with each creditor and carry out the international bond "debt exchange." This step, as highlighted by International Monetary Fund (IMF) resident representative Eric Lautier, is crucial for streamlining the restructuring process and ensuring a sustainable path forward for Zambia's economy.

Official creditors, led by China, have already signalled their commitment by signing a general "principal agreement," a positive step in the process to Zambia’s economic recovery.