Zambian President Hakainde Hichilema slammed the “suicidal” interest rates on his nation’s foreign debt and said reductions to its principal are needed, a demand that may set up a showdown with Chinese lenders.
(Bloomberg) — Zambian President Hakainde Hichilema slammed the “suicidal” interest rates on his nation’s foreign debt and said reductions to its principal are needed, a demand that may set up a showdown with Chinese lenders.
The comments, broadcast on local radio Thursday, come as the African nation struggles to restructure its bilateral loans and bonds after defaulting in 2020. The debt was taken on by previous governments, before Hichilema was elected in August 2021.
We “have to be able to get the principal down,” Hichilema told Sun FM radio in Zambia’s northern Copperbelt province. “We’ll be able to renegotiate the reckless interest rates that our colleagues agreed — 10, 11, 12%. Suicidal. That’s a black mamba kiss of death,” he said, a reference to the highly lethal venomous snake.
Hichilema’s comments come amid talks to restructure $12.8 billion of Zambian debt under the Group-of-20 nation’s so-called Common Framework. Crucially, Zambia owes Chinese creditors about $6 billion, and China has been reluctant to set any precedent of taking direct haircuts on its loans to developing nations.
Ghana formally requested a revamp under that framework in January.
“There is the likelihood that Ghanaian external debt restructuring could occur ahead of Zambia,” said Samantha Singh, senior markets strategist at Rand Merchant Bank. “Ghana’s overall bilateral debt component and particularly the debt owed to China, is not as large compared to countries that have sought debt treatment under the framework.”
“One of the things we are pushing is to make sure that the key creditors — China included and others — come on board,” Hichilema said. “Some of the countries are not used to the approach which is being taken on the debt restructuring. So we are looking at how to combine the issues that will be acceptable to them and to us and to the world.”
The delay in agreeing on a deal, which the US has blamed on China, has undermined the kwacha. The currency has declined every day — save for five — against the dollar since the start of October and is the sixth worst-performing in the world this year, out of 151 monitored by Bloomberg.
The nation’s eurobonds had a flying start to the year, but that is unwinding. Zambia’s eurobonds have made losses of 7% in dollar terms for investors in February. That compares with the 1.9% average decline for emerging and frontier countries in a Bloomberg index.
After becoming Africa’s first pandemic-era sovereign defaulter, Zambia finalized a deal with the International Monetary Fund in September for a $1.3 billion bailout and economic program.
Asked what happens if Zambia doesn’t reach an understanding with creditors by the end of March as planned, Hichilema said his government was “firing from all cylinders” to resolve the impasse.
“Some people are married to women who were not the first people they wanted to marry. They end up marrying another person,” he said. “We are setting our eyes on the resolution of this issue; if we don’t for some reason, we’ll move on.”
–With assistance from Taonga Clifford Mitimingi.
(Updates with Singh quote, Zambia bond performance)
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