Zambia says it has reached a deal to defer debt repayments
that were due in October on a loan from the China Development Bank
(CDB). Zambia owed CDB about $391m at the end of 2019 — about a tenth of
the $3bn it owes Chinese entities — according to the finance
ministry.It was not clear whether the loan in question covers all of
this debt or a fraction of it. China holds about a quarter of Zambia’s
foreign debt.“The Government is very pleased to announce that it has
reached an agreement with the China Development Bank to defer debt
service in respect of a commercial loan facility insured by Sinosure.
Under the terms of our agreement with CDB, interest and principal due on
25th October 2020 will be deferred,” said Treasury Secretary Fredson
Yamba said.Mr Yamba said the deferred interest payment is now payable on
25th April 2021 and the deferred principal rescheduled over the life of
the facility.“Reaching this agreement is an important milestone for
Zambia in our debt relief efforts. This was made possible thanks to
CDB’s and Sinosure’s collaborative and cooperative approach. We will
continue to work with all of our creditors to reach similar interim
agreements around deferral of principal and interest payments.”Mr Yamba
added, “Such interim debt service deferment agreements will provide the
Government with the necessary time to focus efforts on completing its
overall debt strategy aimed at restoring public debt sustainability.”The
government missed a $42.5m coupon payment on one of its Eurobonds that
was due on October 14 but has a 30-day grace period before it goes into
default.It has asked Eurobond holders to defer interest payments until
April 2021, but they have so far rejected the request.One of the
sticking points has been whether other key lenders such as China would
also agree to reschedule repayments.“This is a good step in the right
direction but they still need to do more to appease the creditor group,”
said one of the members of the Zambia External Bondholder Committee,
Kevin Daly at Aberdeen Standard Investments in London.“It is still
piecemeal and what you need is something comprehensive.”He also said it
was not clear whether the announced deal included a deferral of arrears
payments believed to have become an obstacle to some Chinese entities
participating in debt relief for Zambia.Zambia’s external debt is nearly
$12bn, including $3bn of outstanding Eurobonds, $3.5bn of bilateral
debt, $2.9bn of other commercial debt and $2.1bn owed to multilateral
institutions
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