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Zambia was shot in the arm when a Chinese bank suspended interest and principal payments on sovereign loans worth $ 110 million due between May 1 and December 31, 2020.
A government statement late Monday said the Export-Import Bank of China (Exim Bank) move was aimed at helping Zambia ease its debt and liquidity pressures while mobilizing resources to combat the Covid-19 pandemic. .
“This is in line with the G20 Debt Service Suspension Initiative Framework,” said Treasury Secretary Fredson Yamba.
“The development is an important milestone for Zambia in pursuing a broad-based debt relief effort,” he said, adding that the Zambian government was grateful to China.
In mid-October, Zambia got some debt service relief from the China Development Bank, putting more pressure on private bondholders, although that doesn’t seem to be working in the country’s favor given the latest development.
The Chinese state lender agreed to defer the interest due on October 25 for six months and to reschedule the principal owed to the same date during the useful life of the line.
Worsening position
Zambia’s debt situation has worsened and the government has defaulted on some loan payments.
Finance Minister Bwalya Ng’andu told state television late Sunday that some lenders are furious with the South African nation’s decision to pay off a Eurobond under the circumstances.
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“I have been accumulating arrears with other creditors. They are upset that I am accumulating arrears with the Eurobond service. That is the problem,” said Dr. Ng’andu.
“You cannot choose a group of creditors and treat them differently.”
The amounts in question were not immediately clear.
Zambia had until November 13 to convince holders of its $ 3 billion in Eurobonds to accept a six-month interest payment holiday. The request was rejected.
Huge external debt
An estimated $ 12 billion (51 percent of gross domestic product) was Zambia’s foreign debt on the books at the end of 2018.
About 30 percent was owed to China, 25 percent to bondholders and 19 percent to foreign banks. The World Bank, IMF and Western governments have a relatively small stake.
According to analyzes by the International Monetary Fund and the World Bank, some loans have been authorized but are not among the official figures. They amounted to around $ 10 billion in April 2019.
Zambia’s stock of external debt at the end of 2019 was $ 11.97 billion, but guaranteed debt for state-owned companies reached $ 13.55 billion, the minister said.
Most of the borrowed money was used to build infrastructure and pay officials.
