Zambia reaches debt restructuring deal – IMF

Zambia’s creditors have finalised a $6.3bn debt restructuring agreement, paving the way for the disbursement of $188m from the International Monetary Fund (IMF).

“Zambia has reached an agreement on a debt treatment with our official creditors – a significant milestone in our journey towards economic recovery & growth,” Zambian President Hakainde Hichilema announced on Twitter on Thursday.

The deal, struck at a summit in Paris focussed on easing poor countries’ debt burdens, is crucial for Zambia’s economic recovery, which has been marred by mounting debt distress.

Under the terms of the agreement, Zambia’s $6.3bn in debt owned to foreign governments, including China, will be rescheduled over more than 20 years with a three-year grace period during which only payments on interest are due.

Zambia owes its largest official creditor, China, around $6bn, with $4.1bn owed to the Export-Import Bank of China alone.

French President Emmanuel Macron hailed the agreement as “a historic achievement”.

“We remain mobilised to ensure that other countries caught in a debt trap benefit from a multilateral response,” Macron added on Twitter.

The deal not only provides relief from its mounting debt burden, unlocking the much-needed financial resources to revive the country’s economy, but provides a success story for other African countries in debt distress facing protracted negotiations with their creditors.

The long-awaited deal had been held up for months due to a combination of factors. Some US politicians and analysts blamed China for blocking Zambia’s debt restructuring efforts, while others others pointed to the complicated nature of the debt itself.

The deal unlocks the disbursement of $188m under a three-year $1.3bn bailout approved by the IMF in September. The IMF had been holding up disbursement of the tranche until Zambia reached a restructuring agreement with its creditors.