Zambia, Africa’s second-largest copper producer, is on the brink of signing a substantial $6.3 billion loan restructuring agreement with official creditors including China and France, according to confirmation from the International Monetary Fund (IMF) on Thursday. This deal will trigger the disbursement of another segment of a $1.3 billion IMF extended credit facility.
The impending agreement has positively impacted Zambia’s dollar-denominated bonds due in 2027 and 2024, pushing them to their highest levels since September 2022 and a year high respectively. However, this development has also led to a slight depreciation of the kwacha currency against the dollar.
Situmbeko Musokotwane, Zambia’s Finance Minister, characterized the situation as ‘debt distress’ and emphasized the need to assist the most vulnerable in society. The country is also working to finalize bilateral agreements with each creditor and address its $3 billion in Eurobonds.
Commercial creditors are currently awaiting the completion of the memorandum of understanding before they commence their own restructuring on at least as favorable terms under the Common Framework. This framework, which involves China working with traditional Paris Club creditors, is being closely watched by other lower-income countries as a potential model for quicker resolution of their debt issues.
Zambia was classified as the first pandemic-era sovereign defaulter since November 2020. The country’s debt restructuring efforts are gaining momentum and are expected to alleviate some of its financial burdens.
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