China has agreed to join a creditor group as part of international attempts to restructure Lusaka’s debt, giving Zambia’s search for a settlement to the crippling debt problem a substantial boost.
After extensive talks with President Hakainde Hichilema‘s administration, China, the southern African country’s largest creditor, pledged to join the Common Framework at the latest International Monetary Fund (IMF) meeting.
Since taking office last year, President Hichilema has been fighting the country’s debt crisis.
Zambia’s president thanked China for joining international efforts to assist his country restructure its debt on Twitter.
“We engaged with China and other creditors to negotiate a debt resolution package.
“Thank you China for joining the Common Framework. This couldn’t be done in 10 years; (but) we have done it eight months,” he said.
Zambia‘s Finance Minister, Situmbeko Musokotwane, voiced dissatisfaction with the debt restructuring process, which he said had “stalled” due to China’s unwillingness to join the Common Framework.
President Hichilema, who took office last year, inherited a massive international debt from his predecessor, Edgar Lungu, whose government borrowed significantly from China.
Zambia became the first country in the Covid-19 pandemic to default in 2020, after its debt burden reached over 120 percent of its GDP.
Zambia’s capacity to agree on a debt restructuring process with China had put a $1.4 billion three-year extended loan facility with the IMF in December last year in jeopardy.
Lusaka was expected to restructure its $15 billion in external obligations by June this year in order to receive the IMF loan.
Mthuli Ncube, Zimbabwe’s finance minister, said the Chinese intervention boded well for other African countries in a similar predicament.
Zambia requested debt relief through the Common Framework, a program that connects the Paris Club – a group of officials from major creditor countries tasked with finding coordinated and long-term solutions to debtor countries’ payment problems – and the G20’s efforts to provide debt service relief in developing countries affected by the Covid-19 pandemic.
Zambia’s scenario, according to observers, would serve as a test for how to cope with financial difficulties that plague many African countries.
In the last decade, Beijing has become the largest lender to most African countries.
Zambia owes the Chinese government and its enterprises $5.78 billion at the end of 2021, according to government data.
Zambia also owed $1.2 billion to multilateral lending institutions including the IMF, as well as $3 billion in international bonds.