Africa Capital Markets Debt Economy FDI Securities Zambia

Africa’s debt relief talks inch forward

Holders of Zambia’s Eurobonds are squaring up for what is likely to be a complex and lengthy debt-restructuring process.

A group of lenders owning about a third of the nation’s dollar bonds, and in contact with another third, have formed a committee to negotiate with the government. Newstate Partners LLP will advise the creditors, who didn’t disclose who they were. Lazard Ltd. is representing Zambia.

Zambia is looking to overhaul as much as US$11B in foreign debt as part of efforts to unlock emergency funding from the International Monetary Fund. The bonds are trading near 54 cents on the dollar, indicating market expectations that investors will have to waive almost half the face value of their investments.

Elsewhere in the region, Nigeria said it will not request a delay on payments on official credit, becoming the largest country to turn down a G-20 initiative. The government also said it won’t issue Eurobonds this year due to poor market conditions.

Angola has secured a three-year moratorium on payments related to US$22B in Chinese loans. Congo will receive US$1B in aid from the World Bank.

Also read: Africa needs a 3 year debt moratorium to avert depression

Key Developments:

  • Scrapping the debt of heavily indebted African nations will only come back to haunt them, according to two of the continent’s largest banks.
  • World Bank President David Malpass expects private creditors to work out a methodology to join the Group of 20 in providing debt relief for the world’s poorest economies to help them fight the global pandemic.
  • African countries may get debt relief from China more easily than private creditors amid a global push to blunt the economic impact of the coronavirus pandemic on poor nations, a Johns Hopkins University study shows.

Earlier:

  • China pledged to cancel some interest-free government loans for African nations and offered to rework commercial obligations, a sign it’s strongly committed to an initiative to help some of the world’s poorest nations with debt relief.
  • With a recovery in global risk appetite, many nations may not need immediate help and will opt to raise new funds as markets re-open.
  • The medium-term outlook remains dire for countries carrying the burden of a decade-long debt binge.
  • Ghanaian Finance Minister Ken Ofori-Atta has campaigned for a longer debt suspension of three years, with African economies unable to replicate the money-printing stimulus of developed nations.

Source: Bloomberg

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