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Zambia hopes to complete a long-delayed restructuring of more than $13bn in external debt in the first half of this year, the southern African nation’s finance minister has said.
Situmbeko Musokotwane said it was “complex and dangerous to give timelines” on a resolution more than three years after Africa’s second-largest copper producer defaulted on its debt, but that Zambia had made progress.
Asked whether the debt restructuring would be completed in the first half of 2024, Musokotwane said: “I’m hoping so. If I can get it even earlier, that would be better.” The minister was speaking to the Financial Times at the African Mining Indaba, an annual industry gathering in Cape Town.
His remarks came after Zambian officials held talks with China last month to discuss why the country’s biggest creditor objected to a proposed deal between Lusaka and bondholders to restructure about $4bn in US dollar bond claims.
Efforts by President Hakainde Hichilema’s government to move on from the 2020 default were left in tatters last year when official lenders, led by China, rejected the proposal.
People familiar with the Zambian process said China had complained that bondholders were not offering terms “comparable” with the relief that official creditors had already agreed on more than $6bn of their own loans.
The bondholders have said their proposal met debt targets for Zambia set by the IMF under a $1.3bn bailout programme agreed last year, and have chafed at a lack of disclosure of the full details of the official debt relief.
Zambia’s debt impasse epitomises the failure of the G20’s “common framework” process, intended to smooth debt restructurings in the world’s poorest countries, as clashes between official and private creditors mount over transparency and how to share losses.
Zambian officials flew to China last month to make proposals aimed at reviving the debt restructuring talks. Without a deal, the IMF could need to reassess its bailout deal.
The first purpose of the discussions in Beijing “was to get Chinese colleagues to clarify what exactly was not satisfactory, on the basis of which further engagements will be held with the other official creditors”, Musokotwane said.
Zambia would also talk to private creditors to see if the Chinese concerns, could be addressed, he said, adding: “Everyone must sit down and agree that the burden is being shared equitably.”
With a restructuring deal up in the air, Zambia’s central bank has been battling to stem a decline in the kwacha against the US dollar this year by tightening policy.
Despite the challenges, Musokotwane said a recent influx of investment into Zambia’s Copperbelt province, its mining heartland, would help stabilise the economy. Projects include a recent billion-dollar deal by Abu Dhabi’s International Holding Company to invest in the Mopani Copper Mines operation.
“We are excited about the coming of a company from the Gulf to be our partners . . . we see deep pockets,” Musokotwane said.
IHC had already made one $80mn payment and would soon inject another $50mn, he said. This would “provide liquidity to the Copperbelt area and bring relief to the exchange rate, because these people convert this money to spend in Zambia”, he added.
