Zambia’s official creditors, co-led by China, made progress toward a long-awaited debt-restructuring deal on Tuesday and will meet again next month, people with knowledge of the matter said.
(Bloomberg) — Zambia’s official creditors, co-led by China, made progress toward a long-awaited debt-restructuring deal on Tuesday and will meet again next month, people with knowledge of the matter said.
The creditors may sign a memorandum of understanding when they reconvene, one of the people said, asking not to be identified because the information isn’t public. That agreement is a prerequisite to unlocking a $188 million disbursement from the International Monetary Fund.
The Zambian kwacha fell for the first day in 13, and by the most in nearly a month. The kwacha declined 0.6% to trade at 17.3250 per US dollar.
Zambia has been struggling to seal a deal to revamp $12.8 billion in external loans since becoming Africa’s first pandemic-era defaulter in November 2020.
A bilateral creditors committee under the Group of 20’s so-called Common Framework that Zambia is using to revamp its debt was only set up in June and talks have dragged on since.
The IMF earlier this month made receiving the $188 million, which is part of a $1.3 billion support package, conditional on official creditors agreeing to a debt-relief plan.
A deal would be the first under the Common Framework mechanism that China has led together with traditional creditors from the Paris Club and will ultimately include holders of Zambia’s $3 billion in eurobonds. It would also offer hope to countries including Ghana and Sri Lanka, which are trying to restructure debt by bringing Chinese and Paris Club creditors to the table with bondholders.
The Zambian Finance Ministry declined to comment on the official creditors committee meeting. The Paris Club didn’t immediately respond to a request for comment.
Once a deal is reached, private lenders will be required to provide relief at least as favorable as the bilateral creditors.
The Finance Ministry in an emailed response to questions on Monday said it has shared a “concrete proposal” with advisers to a group of bondholders.
“We continue to engage actively with our bondholders and proposals are being exchanged,” the Finance Ministry said. “This proposal represents Zambia’s commitment to finding a resolution that is acceptable to all parties and within the parameters set out by the IMF debt sustainability analysis.”
A committee of Zambia’s bondholders last week held constructive talks with relevant parties at the IMF Spring Meetings in Washington, according to a person familiar with those discussions. There are still significant hurdles to overcome and this will require compromise from all parties to find a solution, the person said.
–With assistance from Neil Munshi and Colleen Goko.
(Updates with currency market pricing and chart.)
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