Zambia seeking ‘win-win’ resolution with creditors after default

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Illustration of Zambia currency, the Kwacha

Zambia is seeking a compromise solution with bondholders and does not expect them to seize its mining assets even though it defaulted on $42.5 million in Eurobond debt last week, Mines Minister Richard Musukwa said on Thursday.

He also said Zambia had no plans to sell its shares in mining companies to raise cash needed to square up.

“We don’t expect Zambia’s assets to be auctioned or taken away,” he told a news conference. “We are very positive that we will get a win-win situation between the bondholders and the government.”

Central bank governor Christopher Mvunga added the non-payment was an intentional move.

“It’s not that we could not pay, just that if we pay one creditor then we need to pay all creditors,” Mvunga told reporters in Lusaka, adding it was a “conscious decision” to not pay.

“One of the conditions is that all creditors have to be treated equally or equitably. I cannot pay one creditor and I am not paying the other one. That is not equitable so the default in itself has got that background,” he said.

The government in September requested a six-month deferral on interest payments for three commercial eurobonds worth $3 billion.

But it missed the $42.5 million interest payment due on one bond on October 14, prompting ratings agency S&P to declare the country in default.

Zambia, Africa’s second-largest copper producer, saw its already fragile financial woes grow even worse thanks to the COVID-19 pandemic and severe fluctuations in the price of copper.

Since the COVID-19 pandemic hit world markets and sent copper plunging in March, the London copper price has rallied 60% and hit its highest level in more than two years on Monday.

 

Story compiled with assistance from wire reports

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