Zambia’s official creditor committee plans to sign a memorandum of understanding to restructure $6.3 billion in debt by the close of the International Monetary Fund’s annual meeting next week, two people familiar with the matter said.
(Bloomberg) — Zambia’s official creditor committee plans to sign a memorandum of understanding to restructure $6.3 billion in debt by the close of the International Monetary Fund’s annual meeting next week, two people familiar with the matter said.
The nation has made slow progress on talks with creditors since June, when the government reached a deal-in-principle with the group co-led by China and France. The agreement would see the country cutting interest rates to as low as 1% and only repaying the loans in 2043, and provided for a 40% reduction in net-present value of the debt.
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Zambia, which became Africa’s first nation to default on its sovereign debt amid the pandemic woes back in 2020, has struggled to come to an agreement with creditors. Earlier this year, the IMF withheld a near-$190 million disbursement to the country because of delays in the official creditor group agreeing to debt relief. China is by far Zambia’s biggest bilateral creditor.
Emerging market debt distress, and China’s role as a major creditor, will be a key topic at next week’s IMF meetings. Some of Sri Lanka’s official creditors are also pushing to reach their own deal ahead of the meetings to restructure the nation’s debt without the participation of China. The IMF is also helping to push a broader “roundtable” to hammer out the way forward on handling debt treatments between the Paris Club, China, private creditors and others.
The Paris Club, an informal group of mostly developed creditor countries of which China is not a member, last week expressed confidence that a deal will be signed by the IMF’s meetings, one of the people said. The club didn’t immediately respond to an email seeking comment.
–With assistance from Taonga Mitimingi.
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