Zambia has became the first African country to ask bondholders for relief since the onset of the coronavirus pandemic, seeking to defer interest payments on its Eurobonds as it battles the economic hit from the pandemic, Bloomberg reported.
The pandemic has worsened Zambia’s finances, which were already straining after years of overspending funded in part by external borrowing. The currency of Africa’s second-biggest copper producer is the world’s worst performer this year, making payments on its $11.7 billion in external debt even more costly after foreign reserves slid to record lows. The government said it hopes its restructuring plans will win support from the International Monetary Fund.
The government had last month secured a debt-suspension deal up to the end of the year from some official creditors. As part of this accord, Zambia was also obliged to seek comparable terms with commercial lenders, according to Mukuli Chikuba, permanent secretary at the finance ministry. Asking for a suspension of interest payments doesn’t amount to default, he said, adding that the government met a coupon payment earlier this month.
Zambian Finance Minister Bwalya Ng’andu is due to present the 2021 budget on Friday, which could offer insights into the government’s restructuring strategy and chances of winning an IMF bailout.