Lusaka – Hope and relief spread across Zambia on Friday after foreign lenders agreed to restructure part of the country’s debt, a win for president Hakainde Hichilema, who was elected on a promise to strengthen a buckling economy.
Zambia, whose total debt amounts to US$32.8 billion, defaulted on its US$18.6-billion foreign debt in 2020 at the height of the Covid-19 pandemic. The restructuring deal, covering around a third of the tab, came on Thursday at a two-day summit in Paris hosted by French president Emmanuel Macron.
The deal, which was secured over two years of tough negotiations, also paves the way to unlock a US$1.3 billion three-year aid plan obtained in 2022 from the International Monetary Fund (IMF).
In a statement, Hichilema said the agreement was a “significant milestone in our journey towards economic recovery (and) growth.” The government hailed a “significant step towards restoring Zambia’s long-term debt sustainability,” adding that it looked forward to working with the creditors to ensure “prompt implementation.”
Zambia is Africa’s biggest copper producer, with a population of nearly 20 million people.
It ran up huge debts under former president Edgar Lungu, who was criticised for borrowing huge sums to finance infrastructure projects during his six years in power before he lost elections in 2021. Negotiations on restructuring had stumbled over differences between creditors, with the United States accusing China, the biggest single lender, of delaying an agreement.
In Lusaka’s business district, groups of people shared copies of the morning newspapers, whose front pages were dominated by the debt story.
“It’s finally done,” the Zambia Daily Mail headlined, while the Times of Zambia led with “Bailout”. Mooya Chilala, who runs a small business selling fertiliser and seeds, said he believed the deal would ease economic pressure on Zambia, and improve living conditions for many people.
“This is something that the previous government attempted for years,” the 44-year-old father of four said. “It’s a good thing for the country.” A French official said the agreement covered US$6.3 billion of bilateral debt, of which US$4.1 billion is owed to China.
Private creditors, who are owed US$6.8 billion, will have to “make a similar effort to what we have done,” the official said.
The country’s total debt at the end of 2022 amounted to US$32.8 billion, including the US$18.6 billion owed to foreign lenders, according to finance ministry figures.
Relief was palpable in parliament on Friday where legislators belted out the national anthem in celebration. The victory is a major success for Hichilema, who swept to power in 2021 on the back of promises to revive the economy, root out graft and woo back scared investors.
“Unlike our colleagues that defaulted on repaying the debt we have secured a debt restructuring programme,” said Garry Nkombo, the country’s local government and rural development minister.
Part of the debt is held by the IMF, World Bank and multilateral development banks,
and is not covered by the restructuring.
The Zambian government said it was “confident that this debt treatment which entails significant maturity extensions and reduction in interest rates, will allow for the allocation of additional financial resources” towards education, healthcare and infrastructure. However, some Zambians were less optimistic. Emmanuel Tembo from the opposition party Patriotic Front told parliament that he hoped “this debt restructuring will result in reduction in the prices of mealie meal”, prices of which have soared, and “in infrastructure development,”.
A 22-year-old street vendor told AFP that the news meant nothing to her and other ordinary citizens, as she sold some oranges.
“There is nothing that will change,” Veronica Mwale said.
The Zambian government said the terms of the debt restructure will be implemented “through bilateral agreements with each member of the Official Creditor Committee”. The head of state also said “it is imperative to establish clear timelines for the implementation of these plans.” in his closing remarks at the Paris summit.
Hichilema, a businessman-turned-politician, had contested five elections before securing the top job. His smooth transition into power after fears of unrest is also seen as providing a boost for investors.
– Nampa/ AFP