Zambia looks to default on debts due to pandemic

23 Sep 20

Zambia has asked to suspend debt service payments for six months to allow it to deal with the Covid-19 hit to its public finances.

 

The move would make it the first country in Africa to default on its debts to private creditors since the beginning of the pandemic.

“The Republic of Zambia is confronted with a very challenging macroeconomic and fiscal situation, aggravated by the Covid-19 crisis, that has severely affected the country’s public finances,” the Treasury said.

“A combination of declining revenues and increased unbudgeted costs caused by the Covid-19 pandemic have resulted in a material impact on the government’s available resources to make timely payments on indebtedness, leading to increasing debt servicing difficulties.”

The government has asked to suspend payments on three rounds of bonds it issued in 2012 (its first ever sovereign bond sale), 2014 and 2015, with payments due in October, January and March.

It follows its application for the G20’s debt service suspension initiative in August, and comes while loan talks with the IMF are ongoing.

Zambia hopes a deal with the fund would come with financial assistance and a programme of economic reforms to help restore fiscal balance.

The IMF last publicly spoke about Zambia in July, saying progress had been made on a deal but the authorities needed to determine their policies and priorities in the context of a recently revised 2020 budget, adding that discussions were still needed to work out the medium-term fiscal stance necessary to restore debt sustainability.

 

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