PARIS, France
Zambia and its government
creditors, including China, have reached a deal to restructure $6.3 billion in
loans, the French government announced Thursday on the sidelines of a
global finance summit in Paris.French President Emmanuel Macron and his wife Brigitte Macron welcome Hakainde Hichilema, centre, President of Zambia before dinner at the the Elysee Palace in Paris, Thursday, June 22, 2023.
The agreement covers loans
from countries including France, the UK, South Africa, Israel and India as well
as China — Zambia’s biggest creditor at $4.1 billion of the total. The deal,
announced by officials who spoke anonymously in accordance with the French
government’s customary practices, may provide a roadmap for how
China will handle restructuring deals with other nations in debt
distress.
The International Monetary
Fund approved the deal, meaning it’s going to allow Zambia to receive more
financing from the institution, the French said. A representative from the IMF
did not immediately respond to a request for comment.
The Zambia deal came at a
summit with more than 50 world leaders, finance officials and activists to
discuss ways of reforming
a global financial system to better help developing nations struggling
with debt, climate change and poverty.
Zambia — the continent’s
biggest copper producer— became Africa’s first coronavirus-era sovereign nation
to default when it failed to make a $42.5 million bond payment in November
2020. The
debt has prevented the democratic nation from developing economically
and taking on new projects. Experts have said such prolonged debt crises can
send nations deeper into poverty and joblessness and exclude them from the
credit they need to rebuild.
U.S. Treasury Secretary Janet
Yellen, who is attending the summit, welcomed news of the Zambia deal.
She visited
Lusaka in January to meet with Zambian President Hakainde Hichilema
and bring attention to the ramifications of its debt crisis.
“I saw firsthand how the
weight of default and a stalled debt restructuring process can bring suffering
to ordinary families and hold back economic growth,” Yellen said. She urged
both official and private-sector creditors to quickly finalize debt
restructuring to “encourage the private investment that is needed to jump-start
the economy.”FILE - People gather to buy charcoal at a busy market in Lusaka, Zambia, July, 5, 2021.
Full details of the deal
weren’t announced. The French officials said Zambia’s debt would be reorganized
over 20 years, with a three-year grace period. It also includes a clause aimed
at ensuring that Zambia gets similar treatment from private creditors, who hold
an additional $6.8 billion in loans to Zambia, but it wasn’t clear that those
private creditors could be required to do so.
“Private creditors know
they’re going to need to restructure (the debt), they have been warned they’ll
need to make a similar effort,” a French official said.
A memorandum of understanding
is expected to formalize the deal in the coming weeks.
The deal is the second to be
agreed under a mechanism — called the Group of 20 Common Framework — created at
the end of year 2020 to associate the Paris Club of government creditors and
other major economies from the Group of 20, including China, in debt
negotiations.
The first was struck last year
with Chad.
Yellen has called for debt
overhang in other countries like Sri Lanka to be addressed as well.
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