Zambia’s push for a resolution to the debilitating debt crisis received a major lift after China committed to join a creditor committee as part of international efforts to restructure Lusaka’s debt.
China, which is the southern African country’s largest creditor, made the commitment to join the Common Framework at the recent International Monetary Fund (IMF) meeting after long drawn out negotiations with President Hakainde Hichilema’s administration.
Debt crisis
President Hichilema has been battling the debt crisis since coming into power last year.
The Zambian leader took to Twitter to thank China for joining international efforts to help his country restructure its debt.
“We engaged with China and other creditors to negotiate a debt resolution package,” he said.
“Thank you China for joining the Common Framework. This couldn’t be done in 10 years; (but) we have done it eight months.”
Ahead of the IMF meetings, Zambia’s Finance Minister Situmbeko Musokotwane had expressed frustration over the debt restructuring process, which he said had “stalled”, largely because of China’s reluctance to join the Common Framework.
President Hichilema, who came into power last year, inherited a huge international debt from his predecessor Edgar Lungu whose administration borrowed heavily from Beijing.
Zambia in 2020 became the first country to default in the Covid-19 pandemic after its debt burden shot to over 120 percent of its gross domestic product.
A $1.4 billion three-year extended credit facility with the IMF in December last year had become uncertain because of Zambia’s inability to agree on a debt restructuring process with China.
Debt restructuring
Lusaka was expected to restructure its $15 billion of external debts in order to secure the IMF loan by June this year.
Zimbabwe’s Finance Minister Mthuli Ncube said the Chinese move augured well for other African countries that found themselves in a similar situation.
Zambia requested debt relief under the Common Framework, a programme linking the Paris Club – a group of officials from major creditor countries whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries – and the G20’s efforts to provide debt service relief in developing countries linked to the Covid-19 pandemic.
Observers say Zambia’s situation will provide a test on how to deal with debt crises that many African countries face.
Beijing has emerged as the largest lender for most African countries in the last decade.
At the end of 2021, the Chinese government and its entities were owed $5.78 billion by Zambia, government data shows.
Zambia also owed multilateral lending agencies such as the IMF $1.2 billion while another $3 billion was in international bonds.