Zambia on the brink of defaulting on foreign debt

Illustration of Zambia currency, the Kwacha

The Zambia External Bondholders Committee meets on Friday to decide whether to accept or reject Zambia’s plan for repaying $3 billion of outstanding Eurobonds.

Illustration of Zambia currency, the Kwacha

Zambia missed an interest payment last month on $1 billion of bonds due in 2024. A 30-day grace period expires on Friday, and should the vote go against Zambia and it doesn’t pay, it would put the country in default, giving investors the right to demand immediate repayment of the principal.

If Zambia does default it would become Africa’s first country to default on sovereign debt since the coronavirus pandemic.

Zambia was already struggling with its $12 billion external debt load. But coronavirus has aggravated pre-existing financial pressures in the country.

Sarah-Jayne Clifton, director of the Jubilee Debt Campaign, said creditors lent to Zambia at high interest rates knowing the debt would probably become too great.  She’s calling for debt relief for the world’s poorest countries.

“That risk has now materialized, and bondholders must now accept a significant debt write-down,” she told the Reuters news agency this week.

“It is simply immoral for bondholders to demand full repayment and to make huge profits on Zambia’s debt while the country struggles with COVID-19, a major economic crisis and spiraling poverty levels,” she added.

Zambia’s Minister of Finance, Hon Dr. Bwalya Ng’andu and Vice President Inonge Wina both vowed that the nation would meet its obligations.
“Zambia will not default,” Wina said in response to a question from an opposition member who asked if the government would miss Friday’s scheduled coupon payment. “A way forward will be found in meeting Zambia’s obligations to the bondholders and other lenders that supported Zambia in her hour of need.”
Zambia has asked for a delay to interest payments until April next year but creditors have not yet agreed.
Story compiled with assistance from wire reports.

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