In a major relief since defaulting in 2020, debt-ridden Zambia has successfully reached an agreement to restructure its debt of $6.3 billion owed to multiple governments, including China the largest official creditor to the southern African nation.
The newly established agreement entails a comprehensive rescheduling of Zambia’s debt, extending over a period of more than 20 years. Notably, a three-year grace period has been granted, during which only interest payments will be due.
According to the news agency Reuters, the debt earmarked for restructuring includes $1.3 billion in arrears, and private sector creditors are expected to do the same on the $6.8 billion owed to them.
“Zambia has reached an agreement on a debt treatment with our official creditors â€“ a significant milestone in our journey towards economic recovery & growth,” Zambian President Hakainde Hichilema said on Twitter.
French President Emmanuel Macron said on Twitter the debt restructuring deal was “a historic achievement”.
“We remain mobilised to ensure that other countries caught in debt trap benefit from a multilateral response,” Macron added.
The restructuring agreement with official creditors paves the way for Zambia to receive another $188 million tranche of money from the International Monetary Fund, part of a $1.3 billion package approved in August 2022.
This agreement was reached on the sidelines of a global finance summit in Paris attended by more than 50 world leaders, finance officials, and activists. The summit aimed to explore strategies for reforming the global financial system in order to better assist developing nations dealing with issues such as debt, climate change, and poverty.
Zambia, known as Africa’s largest producer of copper, became the first sovereign nation on the continent to default during the COVID-19 pandemic when it failed to make a bond payment of $42.5 million in November 2020. The burden of debt has impeded the country’s economic progress and hindered its ability to undertake new projects. Experts warn that prolonged debt crises can exacerbate poverty, and unemployment, and hinder access to the credit required for reconstruction.