LUSAKA, 15 November 2020 – Zambia’s financial woes deepened Friday when it failed to honor a payment of $42.5 million, making it the first African country to default on its international debt since COVID-19 hit.
Last month was when Zambia first failed to make the payment.
It had a grace period until Friday when it could make good on the payment.
Zambia’s Finance Minister Bwalya Ng’andu told reporters on Friday he did not intend to make the last-minute interest payment.
Zambia’s external debt is a whopping $12 billion.
The total debt includes about $3 billion in bonds issued in Europe and another $3 billion from China and Chinese firms.
Eurobond holders would have granted Zambia a six-month holiday on interest payments on $3 billion in bonds had Lusaka made the last-minute payment.
The International Monetary Fund (IMF) had been working with authorities in Lusaka on how to help the country deal with the situation, beginning with how to ensure its debt is sustainable.
The government of President Edgar Lungu has also applied for a delay until April 2021 in interest payments, but international donors have not yet agreed to any deal.
The one exception is the China Development Bank which has agreed to delay debt repayments by Zambia for six months.
Creditors blamed Zambia for not offering a clear and credible plan on how it would get on top of its debt repayments if relief were granted.
The Washington Post noted Sunday that “many sub-Saharan African countries, from Cameroon to Kenya, have issued Eurobonds over the years, amassing debt that is maturing at a time of rising financial burden amid the pandemic”.
“Zambia may be the first country to default on its debt since the start of the pandemic but it certainly won’t be the last if international creditors refuse to work together and support a comprehensive debt standstill,” ONE Campaign warned Sunday. ONE Campaign works on ending global poverty.
“With the encouragement of The World Bank Group, IMF and others,” a World Bank statement of 11 March 2020 read, “G20 economies are allowing the world’s poorest countries to suspend repayment of official bilateral credit on May 1”.
A summit of the world’s 20 wealthiest nations (G20) to be held in Riyadh, Saudi Arabia, 21-22 November, may announce debt relief for poor countries.