Zambia’s Finance Minister Situmbeko Msokotwane attends a panel discussion on the fourth day of the IMF and World Bank annual meeting in Marrakech, Morocco, in response to last month’s deadly earthquake, October 12, 2023 .Reuters/Susana Vera Obtaining license rights
MARRAKESH, Morocco, March 14 (Reuters) – Zambia has signed a memorandum of understanding (MoU) with bilateral creditors to restructure about $6.3 billion in debt, nearly three years after the southern African country defaulted on its debts. The Ministry of Finance announced on Saturday that the agreement had been reached.
Zambia was the first African country to default on its debt during the pandemic, and its restructuring process agreed in June with official creditors, including China and members of the Paris Creditor Club, on rough terms to restructure its debt.
A statement from the ministry said: “Each official creditor will now begin an internal process to sign a memorandum of understanding. After the signing of the memorandum, the terms will be a bilateral agreement with each member of the OCC (Official Creditors Committee). It will be implemented through.”
The agreement includes extending debt maturities by an average of more than 12 years, with interest rates set at 1% for the next 14 years and up to 2.5% thereafter. There is a mechanism to increase payments if Zambia’s economy performs better than expected.
Zambia will pay about $750 million over the next 10 years, compared with about $6 billion owed to official creditors before the debt restructuring.
Zambia’s Finance Minister Situmbeko Msokotwane said: “The next step is to secure parity agreements with private creditors.”
The ministry said Zambia is committed to continuing to make arrears to external commercial creditors until it concludes a debt agreement on terms comparable to the official creditors agreement.
The copper producers’ commercial creditors, including international bondholders, are owed more than $3 billion.
The country is currently in formal discussions with the Bondholders’ Creditors Committee to restructure more than $3 billion in foreign debt.
discussion Started in early October, Therefore, for now creditors are restricted from trading in the country’s banknotes. Zambia has three dollar-denominated bonds with maturities in 2022, 2024 and 2027, currently trading at 52 to 58 cents on the dollar.
It is unclear how long it will take to sign an agreement between Zambia and each bilateral creditor.
“I would like to thank all official creditors for their efforts to eliminate Zambia’s debt insolvency, especially the Commission’s co-chairs, China and France, and its vice-chair, South Africa,” Mr Musokotwane said.
On Thursday, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said Zambia had signed a memorandum of understanding with official creditors, which was later withdrawn by Zambia’s finance minister and the IMF.
Reporting by Rachel Savage and Jorgelina do Rosario.Editing: Giles Elgood
Our standards: Thomson Reuters Trust Principles.