Zambia’s $13bn debt stand-off an ‘indictment’ of global system, says president
Hakainde Hichilema says ‘long overdue’ agreement with China and others given greater urgency by devastating drought
Zambia’s President Hakainde Hichilema has urged China and the bankrupt nation’s other creditors to end the stand-off over its $13bn debt restructuring, calling the delay “an indictment” of the credibility of the global system.
The southern African country has become a symbol of the failures of the G20-endorsed common framework meant to expedite solutions to debt crises in poor countries. The impasse has underlined how tensions between Beijing and Washington over a range of issues are complicating negotiations on sovereign debt restructuring.
Africa’s second-biggest copper producer has been in financial limbo since last year when China, its single biggest creditor, objected to a deal Lusaka had reached with private bondholders. Beijing said the agreement was unfair compared with official debt relief.
Hichilema told the Financial Times that a debt deal was already “long overdue”, and it had been given greater urgency after rains destroyed much of Zambia’s maize harvest and throttled the hydropower that generates most of the country’s electricity.
Creditors’ inability to agree a timely debt relief was “an indictment” on the common framework that Zambia joined in good faith, Hichilema said, adding that the principal sticking issue was “comparability” — bilateral creditors do not want to be treated too differently from private creditors.
He said that unless the weaknesses of this system were addressed, countries would “deal with each other individually . . . and where there’s failure in bilateral negotiations, where should countries go to?”
Three years since Zambia defaulted on its external debt and two and a half years since Hichilema took office, the president said he would have “anticipated that by now we’d have resolved the debt restructuring”, and so had the resources to deal with the drought.
“This is what I’ve called a python around our necks, our chest and our legs, and it needs to be taken out, so we can focus on growth . . . we can focus on drought mitigation,” he said.
Zambia needs a debt resolution to continue a $1.3bn IMF bailout and revive financial flows back into the country.
Many bondholders have privately blamed China for blowing up last year’s agreement and for a lack of clarity and transparency. Hichilema denied that Beijing was standing in the way of a deal, pointing to its recent signing of outline terms on official debt relief. Full details of the terms have not been disclosed.
“If the largest creditor has signed through the global system . . . it means we have resolved with China,” he said. “China must support Zambia as the US, as France, as other countries must support Zambia to find closure with the bondholders and other private creditors.”
Zambia defaulted before Hichilema took office in 2021. Zambia has been working to encourage official and private creditors to return to the negotiating table to sort out the numbers for debt relief, he added.
“We expect this must be done within March, [as] the more we delay, the whole issue is beginning to negate the gains we’ve made [with Zambia’s post-default economic recovery],” he added.
Even before the full effects of the drought, Zambian inflation surged back to double digits in recent months, forcing the central bank to raise interest rates. Zambia plans to import electricity to replace energy lost to the drought but is also having to impose rolling blackouts, a threat to mining production.
“We did our part, now creditors — official, private — must do their part,” Hichilema said. “We encourage all the parties, many of whom have been supportive, to just walk the extra mile and close this transaction.”
This article and image originally appeared on the Financial Times
Image: Reuters