Zambia’s government announced on Monday that it has successfully negotiated a debt restructuring agreement with a consortium of private creditors. This agreement pertains to the restructuring of $3 billion worth of the country’s international bonds, marking a significant step towards resolving Zambia’s prolonged debt restructuring process.
Under the terms of the latest deal, Zambia plans to restructure its existing debt instruments into two amortizing bonds. One of these bonds would offer increased repayments contingent upon improvements in the country’s economic outlook and its ability to manage its debt burden effectively.
This proposal bears a striking resemblance to a preliminary agreement reached late last year, which was subsequently derailed after facing rejection from official creditors, including China, India, and France.
The government has assured that certain creditors will not receive preferential treatment in terms of recovery during the restructuring process, based on net present value calculations. Additionally, the agreement includes a provision for loss reinstatement in the event of a default by Zambia while under the existing International Monetary Fund program.
This development represents a significant milestone in Zambia’s efforts to navigate its debt crisis and restore financial stability. However, challenges still remain, particularly in securing the support of official creditors and implementing measures to improve the country’s economic resilience in the long term.
