Zambia creditors agree to restructure debt

By Ali BEKHTAOUI
Paris (AFP) June 23, 2023

Zambia’s lenders, including major creditor China, have agreed to restructure the country’s public debt, officials said Thursday, providing financial relief to the first African nation to default after the Covid pandemic.
In a tweet, Zambian President Hakainde Hichilema said the country had “reached an agreement on a debt treatment with our official creditors”, calling it a “significant milestone in our journey towards economic recovery (and) growth”.

The agreement on $6.3 billion of Zambia’s debt was confirmed by a French official on condition of anonymity, on the sidelines of a summit aimed at revamping the international financial system to better tackle climate change and poverty.

Zambia, Africa’s biggest copper producer, with a population of nearly 20 million people, defaulted on its $18.6 billion external debt in 2020 but negotiations had stumbled over differences between China and Western creditors.

The United States had accused China of delaying the debt agreement.

The deal involves bilateral debts between Zambia and other countries, with the bulk — $4.1 billion — being its debt with China, the French official said, noting that the process among lenders had been “difficult”.

Chinese Premier Li Qiang was among the world leaders attending the two-day summit hosted by French President Emmanuel Macron, with Hichilema in attendance as well.

The French official said private creditors, who are owed $6.8 billion, will have to “make a similar effort to what we have done”.

Part of Zambia’s external debt, which is held by the International Monetary Fund, the World Bank and multilateral development banks, cannot be restructured.

The country’s total debt amounts to $32.8 billion, including $18.6 billion owed to foreign lenders.

“This unique and innovative agreement specifies both a baseline and a contingent treatment that would be automatically triggered if the assessment of Zambia’s economic performance and policies improves,” said IMF chief Kristalina Georgieva.

World Bank Group president Ajay Banga said the agreement “will help unlock private sector investment, restore growth and accelerate job creation in Zambia”.

Zambia’s debt soared under former president Edgar Lungu, who was criticised for borrowing huge sums to finance infrastructure projects during his six years in power before he lost elections in 2021.

– ‘This is good’ –

In Lusaka, a source close to the presidency said the government had “yet to see the whole deal but so far this is good”.

“It’s something which is good and will allow the government to channel the resources to social sectors like… free education,” the senior government official told AFP on condition of anonymity because he had no authority to comment on the deal.

US Treasury Secretary Janet Yellen, who is attending the Paris talks, added in a statement that she welcomed the latest development.

“I urge all official bilateral and private sector creditors to quickly finalise the debt restructuring process that will provide relief to Zambian families and encourage the private investment that is needed to jump-start the economy,” she said.

African nations, already hit hard by the pandemic, faced more economic pain after Russia’s invasion of Ukraine, with the conflict sending global food prices through the roof.

Public debt in sub-Saharan Africa reached 56 percent of gross domestic product last year, the highest since the beginning of the 2000s, the IMF said in an April report.

Borrowing costs in the region are three times higher than those of developed nations, the IMF said.

Kenyan president slams ‘unfair’ global lending system; Macron touts ‘complete consensus’
Paris (AFP) June 23, 2023 – Kenyan President William Ruto does not hold back when describing the global lending system: it is “unfair, it’s punitive, it doesn’t give everybody a fair chance”.

Ruto made his blunt assessment in an interview with AFP on the sidelines of a two-day summit in Paris seeking to revamp the international financial order to better help developing nations combat poverty and climate change.

Currently, poorer countries have to pay as much as eight times more in interest rates than rich nations “because they are profiled as risky”, Ruto said.

But the Kenyan leader said his country is not looking for handouts.

“Some people do not want a mechanism where people are equal, they want us to continue this conversation where we are looking for help,” Ruto said.

“We are tired of this story” painting Africans as “victims of climate change” who are “looking for favours” and “complaining”, he said.

“We do not want to look for help. We want to participate in the solution,” Ruto said late Thursday, on the eve of the summit’s final day.

He wants to attract private investment more than development aid for his eastern African nation, but he is also calling for reform of the International Monetary Fund and World Bank.

He also backs a rethink of debt management of developing nations and the deployment of international taxes on shipping, aviation and financial transactions.

Kenya pays $10 billion a year to service its debt.

“If we use it instead for development of the country, it will be immediate, it will be big resources and it will have huge impact,” Ruto said.

He said this could be achieved if the debt owed to international lenders, including the World Bank and IMF, were converted into a 50-year loan facility with a 20-year grace period.

This way, Kenya would “not run away” from its debt, which would have “just been rescheduled.”

French President Emmanuel Macron told the summit, which ends Friday, that the global financial system needs a jolt as “countries shouldn’t ever have to choose between reducing poverty and protecting the planet”.

– ‘Avoiding the blame game’ –

Western nations have so far failed to meet their pledge to provide $100 billion in annual aid by 2020 to help developing countries green their economies and build resilience against future climate change.

Such broken promises have undermined trust between developing and wealthy nations as they head into the COP28 climate summit in Dubai later this year.

Ruto is keen to show a strong African climate response and Kenya is hosting a key regional meeting, the Africa Climate Summit, in early September.

Some African leaders have noted that Western powers were quick to provide billions of dollars in aid to Ukraine following Russia’s invasion, while dragging their feet on climate change.

“Ukraine is nothing compared to the problem we face with climate change” which poses an “existential threat to everybody”, Ruto said.

“We must set aside all these other issues and deal with climate change together.”

But Ruto said it was not only up rich nations to pay the world’s climate bill.

“We want to pay, all of us,” he said. “As we continue the tension and the finger pointing, the world is burning.”

“We want to repair (trust) by avoiding the blame game,” he added.

Ruto used some salty language to drive home his point.

“We don’t want to say ‘the North is the one which brought about this problem, They are the emitters’. That is also true, but we don’t want to go there. Today we are all in shit.”