Zambian finance minister Situmbeko Musokotwane on Thursday urged other African nations considering using the G20’s Common Framework mechanism to restructure unaffordable debt to act quickly.
Africa’s first pandemic-era sovereign defaulter has been using the template to rework external liabilities totalling $12.8bn.
In recent weeks, Nigeria and Ghana have announced they’re considering revamping their liabilities. Rising interest rates and a surging dollar may push more nations into default as they struggle to pay for imports from fuel to food.
The framework is the best option for governments of poor countries, even though progress has been slow, Musokotwane said in an interview.
“I would encourage my colleagues from the other African countries not to hesitate, but to come forth and get their problems solved,” he said in Washington, where he’s attending the World Bank and International Monetary Fund annual meetings. “This is the only viable option as of now that is available for countries to resolve their debt unsustainability.”
Musokotwane’s endorsement comes after criticism that the process has moved too slowly. Zambia has been struggling to complete a complex debt restructuring since starting the process more than two years ago. The nation has secured a crucial $1.3bn IMF assistance package and received assurances from a committee of bilateral creditors that they’re willing to negotiate, but is yet to agree on the broad terms of any deal.
The government also needs to bargain with holders of its outstanding $3bn in eurobonds, along with other commercial creditors.
“We are pushing as hard as we can” to sign a memorandum of understanding with the official bilateral creditors, Musokotwane said. “I will be very delighted if it can happen before the end of this year.”
Test case
Zambia’s restructuring is a test case for how Chinese creditors will negotiate together with other bilateral lenders and bondholders. The government is one of three globally to use the G20 framework as a co-ordinating mechanism to rework liabilities. Chad and Ethiopia are the other two.
Chinese lenders account for more than one-third of Zambia’s external debt, according to the finance ministry. The government isn’t seeking to rework all of its dollar liabilities, including those owed to multilateral development financial institutions, the ministry said on October 7.
“We are comforted by the fact that there is commitment and everybody realises that this is really the way,” Musokotwane said. “There is no other way for Zambia to follow if we’re to get to debt resolution.”
The nation hopes to hold its third official creditors committee meeting “in weeks rather than months”, he said.
Zambia last week said it needs external creditors to reduce the net-present value of their loans by $6.3bn, or 49% of the face value of the $12.8bn foreign debt the government is trying to restructure.
Negotiations over the relief are yet to start and preparations are under way to plan for the meetings, the finance minister said.
Bloomberg News. More stories like this are available on bloomberg.com
