Weak Zambian economy bailed out with $6.3 billion debt restructuring
At the global finance summit in Paris this week, Zambian President Hakainde Hichilema learned that his government would be benefiting from a debt restructuring after months of discussions. Zambia owes several governments, including France, the UK, South Africa, Israel, India, and China $6.3 billion (with $4.1 billion being owed to the Export-Import Bank of China). In 2020, Africa’s largest copper producer became the first African nation to default on its debt payments during the global pandemic. Elected in 2021, Hakainde inherited a staggering foreign debt racked up by his predecessors Michael Sata and Edgar Lungu. Unlike Lungu who borrowed excessively from the Chinese to finance infrastructure projects, Hakainde promised that he would pivot toward the West to solve Zambia’s economic woes while on the campaign trail. According to insiders, China was the last nation to be persuaded to agree to the deal. After getting China to agree to the debt restructuring, French President Emmanuel Macron called the deal “historic.” According to AP, some experts believe the debt restructuring may be a blueprint for the way China deals with other nations in debt distress in the future. Although the details of the deal have not been published, insiders say it involves Zambia repaying its debts over a 20-year period; a three-year grace period, during which only interest will be paid; and a clause encouraging private lenders that hold an addition $6.8 billion of debt from Zambia to restructure their loans as outlined in the agreement. According to Reuters, on the heels of the debt restructuring, Zambia will soon receive a tranche of $188 million from the IMF, which is part of a $1.3 billion package approved last year.
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