Debt Restructuring Glitch As Zambia Faces Arbitration by Afreximbank in Dispute Over Loan
African Export-Import Bank is pursuing arbitration against Zambia in a dispute over debt relief, according to people familiar with the matter, a move that may set a precedent for other nations seeking to restructure loans they can’t afford.
Felix Nkulukusa, Zambia’s secretary to the treasury, told investors about the development at a meeting in London last week, according to two people who attended the gathering who asked not to be identified as the discussions were private.
Asked for comment, he referred Bloomberg to the nation’s attorney general on the grounds that it was a legal matter. The attorney general didn’t respond to requests for comment.
Afreximbank — which has said it has preferred creditor status that exempts the lender from being compelled to restructure its loans — declined to comment. Zambia has asked the lender to rework its debt on more favorable terms for the southern African nation.
While the loan in question is relatively small — less than $50 million — the outcome may be far-reaching for both Zambia’s broader debt restructuring efforts, as well as for other African nations needing debt relief.
For example, the restructuring that Zambia agreed to with holders of $3 billion of eurobonds last year included a clause preventing Zambia from granting another creditor a better deal than they got, without also offering the same terms to bondholders.
That, in turn, would raise questions over the agreement Zambia struck with its Official Creditor Committee, co-chaired by China and France, which requires commercial creditors to provide Zambia with at least as much debt relief as they agreed to.
Test Case
The development is the latest faced by Zambia, which has served as a test-case for the Group of 20’s Common Framework — a set of guidelines for low-income countries to restructure unaffordable debts in the wake of the Covid-19 pandemic — after becoming one of the first to use the mechanism.
The copper-rich nation has faced many setbacks and delays as it inches toward concluding the process that began when it defaulted almost five years ago. So far, the government says it has agreements for more than 90% of the $12.8 billion in loans it set out to revamp.
Nkulukusa told investors that Zambia had initially proposed that Afreximbank refinance the existing facility with a new concessional loan that would match the debt relief that the other creditors had provided, according to one of the people.
Ghana also faces a dispute with Afreximbank. The government in May asked the lender to start discussions to provide debt relief that would be comparable to what other creditors agreed.
Source- Bloomberg News
In the meantime PF want to behave like they are not the cause of these issues and life needs to continue like these are not bottlenecks to the provision or the capacity to provide social amenties to Zambian citizens. Talk about living with ones head in the sand….Zambian opposition politicans