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.
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 lenient China may be 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, they said.
A discussion between French President Emmanuel Macron, Chinese Prime Minister Li Qiang, Zambian President Hakainde Hichilema to praise the conclusion of year-long negotiations is to take place during a dinner of heads of state and government at the Elysee presidential palace on Thursday evening.
The Zambia deal came at a summit that is bringing together 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 became Africa’s first coronavirus pandemic-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 a prolonged debt crisis could permanently prevent Zambia and other debt distressed nations from recovering, leading to nations sliding deeper into poverty and joblessness and excluding them from credit to rebuild in the future.
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 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.
Earlier Thursday, U.S. Treasury Secretary Janet Yellen, who is also attending the Paris summit, expressed hope that “debt treatment can move forward soon" regarding Zambia. She visited Lusaka in January, to meet with Hichilema and bring attention to the ramifications of the debt crisis.
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Associated Press reporter Fatima Hussein in Washington contributed to this report.
