In an ambitious bid to overcome a longstanding debt restructuring impasse, Zambia is aiming to find common ground among its creditors within the next three months, according to a senior official from the Finance Ministry.
The deadlock revolves around differing opinions on how various categories of loans should be treated equally. Treasury Secretary Felix Nkulukusa provided insights during a press briefing in Lusaka, the nation’s capital, stating, “We anticipate concluding this matter not later than the first quarter of 2024. We’re optimistic that all stakeholders will align their interests.”
In a significant development last November, China raised objections to a proposed debt agreement between Zambia and its bondholders. This dispute partly stemmed from a misunderstanding regarding the equitable treatment of creditors, as reported by sources familiar with the matter in the past month. Zambia, a southern African nation, made history as the first pandemic-era sovereign defaulter on the continent over three years ago. Since then, it has grappled with the challenge of formulating a new repayment plan that satisfies all lenders.
Zambia embarked on a mission to restructure its liabilities through the utilization of the “Common Framework.” This framework was established by the Group of 20 in late 2020, with the aim of assisting less affluent nations in reworking their debts with all creditors. However, on the global stage, a consensus has remained elusive regarding the equitable treatment of diverse categories of creditors. Even the International Monetary Fund-driven Global Sovereign Debt Roundtable has yet to reach a unanimous decision on this crucial matter.
Treasury Secretary Nkulukusa acknowledged the complexity of being trailblazers in implementing the Common Framework, saying, “This is one of the challenges of being the front-runners.”
As Zambia navigates this intricate terrain, it remains committed to finding a resolution that not only addresses its debt concerns but also fosters economic stability and growth. The nation’s determination to overcome this hurdle within the next three months reflects a proactive approach in seeking a sustainable debt restructuring solution.
