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China and India have signed agreements to restructure their holdings of Zambian debt, the bankrupt southern African nation’s president has said, raising hopes that a delayed effort to exit a long-running default is back on track.

Hakainde Hichilema said Zambia planned to resume talks with private creditors to resolve a “terrible debt mountain” of more than $13bn in external debt that Africa’s second largest copper producer stopped paying in 2020.

Zambia agreed outline terms to modify $6.3bn in debt owed to official lenders last year. But progress was wrecked when China, the single biggest creditor, objected to a deal with private investors involving about $4bn in US dollar bond claims — making Beijing’s signing of a deal now more significant.

“The last two countries that had not signed [deals as] official creditors, China and India, have signed, and I’m very pleased to indicate that,” Hichilema told traditional leaders at Zambia’s annual N’cwala harvest ceremony in the country’s east.

“We are getting there — working steadily, definitely, we are getting there, and now we are turning our attention to the private creditors that we hope to be able to put to bed soon,” he added.

Zambia needs deals with its creditors to continue a $1.3bn IMF bailout and resume an economic recovery, with Hichilema hoping to bring in more foreign investment to revitalise the country’s copper mines.

Delays to Zambia’s restructuring had become a symbol of the failure of a G20 process to better integrate China into negotiations to avoid debt crises dragging on for the world’s poorest nations.

Beijing rose to be the world’s biggest lender to poor countries in the last decade, but remained outside the western-dominated Paris Club of creditor nations.

The “Common Framework” to include China as well as India has become bogged down by tension between creditors about how losses on defaulted debts should be shared.

China rejected last year’s deal with Zambia’s bondholders because the agreement did not meet its understanding of “comparability of treatment”, a notoriously slippy yet crucial concept in sovereign debt restructuring for ensuring that official and private creditors come out equally.

“This concept [of comparability of treatment] was not properly clarified, leading to ambiguous understanding by different creditors,” Finance Minister Situmbeko Musokotwane told Zambia’s parliament this week. “With progress made to clarify the term, this should pave the way for agreement on the private creditors as well.”

While Zambia remains in default, the central bank has been battling depreciation of the kwacha against the dollar and a revival of inflation.

Musokotwane warned this week that a drought during the country’s current growing and harvest season was also “one of the worst in living memory” that would require extra support for households in the government’s budget.

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