Zambia’s hopes of striking a long-awaited debt restructuring deal with bilateral creditors at a meeting scheduled for next week might be a stretch, according to the nation’s central bank governor.
(Bloomberg) — Zambia’s hopes of striking a long-awaited debt restructuring deal with bilateral creditors at a meeting scheduled for next week might be a stretch, according to the nation’s central bank governor.
“Maybe that’s pushing it a bit too much,” Denny Kalyalya said in an interview, when asked if he thought signing a memorandum of understanding with an official lenders committee is likely. “But at the very least, I think a heads of agreement or key clear indication of what are the issues that should form the final kind of understanding would be very helpful.”
Zambia is trying to restructure $12.8 billion in external liabilities since becoming Africa’s first pandemic-era sovereign defaulter in 2020. The nation has emerged as a key test case for how to work out unaffordable sovereign debts in a new, complex creditor landscape that involves bondholders in Europe and state-owned Chinese banks, as well as the traditional Paris Club group of bilateral lenders. The process has proved frustratingly slow, hitting Zambia’s currency and holding up crucial funding from the International Monetary Fund.
Zambia’s kwacha posted a 10th straight day of gains against the dollar, to reach its strongest level since Jan. 4.
A key meeting with Zambia’s official creditors committee co-chaired by China and France is scheduled for April 18, raising hopes that a deal may be near after months of negotiations and public clashes between Beijing and the US.
The Washington-based lender needs Zambia’s creditors to sign a memorandum of understanding on the debt restructuring to allow the institution’s board to sign off on the next $188 million disbursement to the southern African nation.
Finance Minister Situmbeko Musokotwane called on the IMF to make the disbursement regardless, because it wasn’t fair to punish Zambia because the government had performed according to its program with the lender.
The fund isn’t penalizing Zambia, Africa Department Director Abebe Selassie said in an interview this week.
“We are on the side of helping the member that is facing debt difficulty,” he said. A deal must come soon so “the resources being provided by the IMF helps create fiscal space in the country rather than going off to pay creditors.”
Zambia expects that the committee meeting April 18 may produce a result strong enough to unlock the next tranche of IMF funds.
“What we are keen on is to get an opener to the disbursement to be made,” Kalyalya said. “Whether you have an MOU already, that would be excellent. But if the MOU is not ready to be signed, but at least the elements of it will be such that enables the process to move forward.”
–With assistance from Taonga Clifford Mitimingi.
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