Zambia, the first African nation to seek debt relief from Eurobond holders since the onset of the pandemic, aims to reach a restructuring deal with creditors by the end of a six-month interest standstill it’s seeking, Finance Minister Bwalya Ng’andu said.
The government also plans to reach an agreement in principle with the International Monetary Fund over an economic program in the same time frame, he told bondholders in a webcast on Tuesday. Zambia’s US$1B of Eurobonds due 2024 fell 1.5% to 51.28 cents on the dollar by 4:10 p.m. in London.
The southern African nation has over the past decade taken on nearly US$12B of debt even as growth slowed and foreign-exchange reserves dwindled. The pandemic accelerated the crisis, prompting the government last week to request an interest-payment holiday from holders of its US$3B in Eurobonds while it plans a debt restructuring together with its adviser, Lazard Freres.
Zambia wants debt relief from commercial creditors similar to what the so-called Paris Club group of lender nations had agreed to under a G-20 initiative, according to Ng’andu. The government’s requests for interest payment suspensions could provide nearly US$1B in relief, according to a copy of the presentation Ng’andu delivered. He didn’t take questions from creditors, saying he would respond to written requests.
“We are committed to fair and equitable treatment of all creditors,” he said. “We expect the same level of commitment from creditors.”
Ng’andu’s time frame to reaching deals with creditors and the IMF might be overambitious. Eurobond holders want the government to first reach a deal with the International Monetary Fund over an economic program, and a general election scheduled for August next year may complicate that. Neighboring Mozambique took about three years to restructure its Eurobonds after starting talks with investors in 2016, when it said it targeted a deal three months. Lazard and White & Case advised that government too.
“Given Zambia’s complex creditor base, the debt restructuring there is expected to take some time,” Gerry Rice, an IMF spokesman, said last week.