Hakainde Hichilema, Zambia's president, during a Bloomberg Television interview in Paris, France, on Friday, June 23, 2023. Zambia reached an agreement in principle to restructure $6.3 billion of bilateral debt even though the accord didn’t meet all the government’s targets, according to Hichilema. Photographer: Nathan Laine/Bloomberg
LONDON: Zambia will pay interest rates of as low as 1% until 2037 as part of its debt restructuring deal secured with nations including China this week, according to people with knowledge of the matter.
The southern African country will push out maturities on US$6.3bil (RM29.5bil) in bilateral debt to 2043, representing an average extension of more than 12 years.
Rates will increase to a maximum 2.5% after 14 years under the baseline scenario, said the people, who asked not to be identified because the details weren’t public.
Zambia was paying an average of 3.9% on its Chinese bilateral loans, according to estimates by Debt Justice, a UK organisation that campaigns for loan cancellation for poor nations.
The Zambian government announced the landmark deal in Paris this week under the Group of 20’s Common Framework mechanism for traditional creditors of the Paris Club to negotiate deep relief alongside new lenders, especially China.
The nation must now get its private creditors to agree to comparable treatment.
It’s a major breakthrough for a process that had been mired in delays, just as the number of countries needing restructuring expanded.
Zambia became Africa’s first pandemic-era sovereign defaulter in November 2020, and has been in talks with its official creditor committee for about a year.
“It was like a mission impossible,” Zambian President Hakainde Hichilema said last Saturday to a cheering crowd of hundreds at the airport on his return to Zambia’s capital, Lusaka.
“It wasn’t a straight line. It was zig-zag, sideways, forward, backwards, down, up. But we kept our eyes on the ball.” — Bloomberg
