ZAMBIA is a step closer to a long-awaited debt- restructuring agreement, with its official bilateral creditors set to meet April 18 after key roadblocks were resolved, the nation’s Treasury Secretary said, reports BLOOMBERG.
The creditors – the largest of which is China would likely meet next week as most outstanding issues “were being addressed,” Felix Nkulukusa said in an interview in Washington Wednesday.
The nation was seeking to revamp $12.8 billion in loans held by creditors including Chinese state-owned banks and Eurobond holders.
As a list of low income nations struggling to service debts with rising interest rates grows, Zambia was a crucial test case of how new lenders like China could work with traditional bilateral creditors and bondholders to restructure liabilities.
The main hurdles to a deal were around multilateral development banks, or MDBs, sharing the burden with bilateral creditors, as well as the involvement of foreign residents holding the nation’s local currency bonds.
The 49 per cent reduction in the present value of their loans that Zambia’s asking creditors to accept had also caused friction.
“One such issue is the question of the fair burden sharing by the MDBs, and we have seen that the MDBs have come on board,” Mr Nkulukusa said, adding that the African Development Bank, International Monetary Fund and World Bank had made commitments.
Likewise, the amount of domestic debt that foreigners hold has fallen to about $2.1 billion from $3.3 billion previously, he said.
The next milestone was for the official creditors committee to sign a memorandum of understanding with the government over the restructuring.
Zambian officials’ hope was that discussions at the creditors’ committee meeting could evolve from questioning the assumptions and parameters in the debt sustainability analysis to starting a discussion on how to deliver a restructuring, said Mr Nkulukusa, who spoke on the sidelines of the IMF spring meetings.
“If they agree to start discussing the MOU, then of course we go into the discussion” and then the signing, he said.
“On the other side, we’re also engaging the bondholders and the private creditors. We are hoping that they would be able to come on board and then we can also agree with them under the comparability-of- treatment conditions.” said Mr Nkulukusa.
Still, it was not certain that the committee co-chaired by China and France – would be able to reach a consensus that had already taken months since the body formed in June.
“We don’t know whether they’ll agree in this meeting,” said Mr Nkulukusa.
“Once we do that engagement, then our colleagues would be able to come on board and say, ‘yes, we can move ahead, or probably there are few adjustments that we need to make in there.
And we have that discussion. So it is mostly in the hands of the official creditors’ committee,” he said.
Meanwhile World Bank President David Malpass is optimistic that Zambia’s creditors, including China, would sign a memorandum of understanding on its debt restructuring this week or next.
Mr Malpass said it was incumbent upon China and other creditors to come forward with actual commitments to allow Zambia access its debt restructuring.
He said Zambia, which requested debt treatment under a Group of 20 framework nearly two years ago, should be given a chance to return to sustainable debt levels.
Mr Malpass said this during a press briefing held in Washington at the ongoing Spring Meetings.
Mr Malpass said a new sovereign debt roundtable aimed at resolving bigger issues around debt restructuring had made progress.