Zambia will send its first fully-formed debt restructuring plan to China and other government creditors “very soon” the government’s legal advisors said, as it looks to capitalise on fresh momentum seen in high-level talks in recent days.
Zambia has been in default since 2020 when it became one of the first major sovereign casualties of the COVID-19 pandemic, but its hopes of restructuring what is over $18 billion of debt have been hampered by the concerns of its main creditors, including China, about the scale of relief required.
This week the government and Zambia’s “official sector creditor committee, which is co-chaired by China and France, held its first formal meeting in over a year, with progress reported to have been made in a number of areas.
“We are hoping to provide a restructuring proposal to the official creditors (committee) very soon,” Melissa Butler at White & Case, the law firm advising Lusaka on the restructuring, told Reuters, adding that meant the “coming weeks”.
“We want to start talking about concrete proposals about what debt relief would look like.”
Having a formal restructuring plan on the table would mark a significant step in the process which has dominated free market-friendly President Hakainde Hichilema’s term since his landslide election win in 2021.
Zambia is hoping for more than $8 billion of debt relief and Hichilema recently warned that if the restructuring was not able to be concluded soon, it would “tarnish” the tough fiscal reform measures the government has been undertaking.
Finance Minister Situmbeko Musokotwane told reporters on Friday that it was also close to signing “a memorandum of understanding” with the official sector committee, another step that would show their readiness to provide debt relief.
Zambia’s restructuring has a wider importance too.
It is seen as both a key test of the G20-led Common Framework vehicle designed to make restructurings smoother, and to ensure that China, now the dominant lender in swathes of developing countries, plays its part.
“Everybody understands the urgency from Zambia’s perspective,” the country’s legal adviser Butler said, adding that the proposal that will be presented to the creditor committee won’t include any surprise numbers or details.
“It will fit within the parameters of the DSA (the IMF’s debt sustainability analysis), that is the most important thing,” she said. “There is no choice but to have a deal, so we have to get there.”
