Zambia is on the verge of concluding its debt restructuring talks, a move that will make it eligible for foreign financing once again, a French diplomatic source said on Tuesday.
France, co-chairing Zambia’s creditor committee with China, became the first country to sign a bilateral debt restructuring agreement with Zambia earlier this month under the G20 common framework.
The southern African nation, home to nearly 20 million people and the continent’s largest copper producer, defaulted on its $18.6 billion external debt in 2020 during the Covid-19 pandemic. This made Zambia the first country to default under pandemic pressures.
The G20 common framework, introduced in 2020 to support low-income nations with debt restructuring, has been pivotal in Zambia’s recovery efforts. Last year, Lusaka reached an agreement in principle with official creditors to restructure $6.3 billion of its public sector debt.
France holds only $100 million of this debt, but a French diplomatic source said the December 8 bilateral agreement with Zambia paved the way for all countries and creditors.
In addition to public sector debt restructuring, Zambia also secured a deal earlier this year to reorganise more than $3.5 billion in private sector debt under the G20 framework.
The debt restructuring process has brought together traditional Western lenders in the Paris Club and non-Paris Club G20 members, such as China. Despite earlier challenges, discussions with China’s Export-Import Bank have been significantly more constructive this year, according to sources close to the Paris Club.
“It proves that multilateralism works, that it’s credible, that it’s efficient and that it’s fair,” said a French diplomatic source, highlighting the significance of Zambia’s progress in strengthening the framework.
Zambia’s case has been seen as a critical test of the G20 common framework. Lessons learned have reportedly expedited similar restructuring efforts for Ghana and Ethiopia, both facing similar debt crises.
The successful conclusion of Zambia’s restructuring could bolster confidence in multilateral debt relief strategies at a time when concerns over debt sustainability in low-income nations continue to rise.
