Reckless borrowing: Zambia Sinks in debt beyond redemption?

Zambia defaults debt, fail to disclose details on Chinese loan to bondholders

The southern African country has defaulted its national debt, with creditors failing to grant a debt relief owing to lack of transparency of information, especially on the country’s dealings with China.

The country’s Minister for finance, Bwalya Ng’andu stated that, China has demanded that issues relating to loans and other relations should be kept highly confidential hence the difficulty in giving such out to bondholders without a confidentiality agreement.

“The information they(bondholders) wanted required very elaborate information relating to loans we have with other creditors. The view and position of the other creditors was, ‘OK, you can do it but you must first have a confidentiality agreement with bondholders.’ As it turned out, they didn’t sign. The position of the Chinese banks is, ‘you’re not going to give anybody any information’” without the confidentiality agreements in place.

According to the finance minister, “Zambia missed a $42.5 million interest payment on $1 billion of Eurobonds maturing in 2024.” Ng’andu added that, “the default was unavoidable because the country, which had received some debt relief from China Development Bank, had to treat all creditors equally and had already built up arrears on other loans”

However, Zambia’s Bondholder Committee made it very clear that, the default is “unnecessary” and “risks establishing a more adversarial backdrop to future discussions with bondholders.”

According to foreign debt figures known to the public, Zambia owes about $12 billion of external debt which the country is currently seeking support and some relief to restructure.

Zambia was once in the news for reportedly defaulting a Chinese loan leading to the seizure of some key facilities; a report which was denied by officials. Due to the non-disclosure agreement between China and Zambia, it is very difficult to know if the country is suffering any bad consequences at this critical point.

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