Reuters Next: Zambia on track for debt restructuring next quarter -finance minister

Jiangxi Bank

01/12/2022 05:59

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      Pandemic, economic mismanagement led to sovereign debt
default
    

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      Zambia's external debt worth around $15 billion 
    

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      China seeking clarity on IMF debt relief parameters
    

  
 (Adds IMF spokesperson in paragraphs 7, 8)
    By Rachel Savage and Bhargav Acharya
       JOHANNESBURG, Nov 30 (Reuters) - Zambia is pushing hard
to complete the restructuring of nearly $15 billion of external
debt in the first quarter of 2023 and is "in active engagement"
with its largest bilateral creditor China, Zambia's finance
minister said in an interview at the Reuters NEXT conference. 
    Zambia defaulted on its sovereign debt in 2020 and the
current government, which took power last year, has been on a
quest to restructure its loans and rebuild an economy ravaged by
mismanagement under previous administrations and COVID-19.
    In August, Zambia won International Monetary Fund (IMF)
approval for $1.3 billion, three-year loan programme to help it
restructure debts which the government said stood at $14.87
billion at the end of June 2022.
    Zambia's Finance Minister Situmbeko Musokotwane told Reuters
China had sought clarification from the Zambian government and
the IMF on their debt agreement, he said.
    "The Chinese... are asking (for) a number of clarifications,
which us and the IMF are providing them," Musokotwane said.
    China wants more clarity on the IMF assumptions on which the
loan programme is based, he said, since these are meant to form
the basis of the restructuring negotiations between Zambia and
all its creditors.
    An IMF spokesperson said China and other official creditors
have had a number of technical questions since its staff report
and Debt Sustainability Analysis for Zambia's programme request
were published.
    "This technical due diligence is currently ongoing. Fund
staff is trying to facilitate that process so that technical
issues can be resolved and negotiations can continue to
progress," the spokesperson told Reuters.
        TEST CASE
    Zambia's much-delayed debt restructuring is seen by analysts
as a test case for what are expected to be a spate of defaults
in poorer countries that have borrowed heavily not only in the
capital markets but also from countries including China.
    IMF strategy chief Ceyla Pazarbasioglu said Zambia's debt
restructuring was the real test case for the Common Framework,
set up in late 2020 by the Group of 20 major economies. 
    At the end of 2021, Chinese creditors accounted for almost
$6 billion of Zambia's external debt, which was then $17.27
billion.
    Zambia's government said earlier this month that the
Export-Import Bank of China (EximBank) was representing China on
the bilateral 'official creditors committee'. 
    Asked whether EximBank was also representing Chinese
commercial creditors, Musokotwane said EximBank is "the lead
negotiator for the Chinese interests". Zambia's Chinese
creditors include commercial banks such as Industrial &
Commercial Bank of China  601398.SS , Jiangxi Bank  1916.HK  and
China Minsheng Bank  600016.SS . 
    China's Ministry of Foreign Affairs did not immediately
respond to a request for comment.
    Musokotwane added private creditors were cooperating well in
debt relief discussions and there had been a bondholder meeting
this week.
    Zambia's government said in October it needs a present value
debt reduction by 2027 of $6.3 billion, or 49% of the debt being
restructured, to meet IMF targets, a level some international
bondholders have previously said would be unacceptable.
    COPPER MINING
    Musokotwane also said he hoped to make an announcement by
the first quarter of next year about potential new investors in
Konkola Copper Mines (KCM) and Mopani Copper Mines (MCM).
    "We are hoping that by first quarter of next year we should
be there with some of them. And also some of the new investments
that are coming from the U.S. and other places," he said.
    Zambia's previous government put KCM into liquidation in
2019, triggering a legal dispute with its parent company,
Vedanta Resources, that is now being settled out of court.
    Zambia's state-owned mining company ZCCM Investments
Holdings  ZCCM.LZ   took over MCM in 2021 from commodities giant
Glencore  GLEN.L , which mothballed its operations in 2020 due
to weak copper prices.
    The government is aiming to treble copper production to 3
million tonnes per year within the next decade in Africa's
second largest producer of the mineral. 
     To view the Reuters NEXT conference live on Nov. 30 and
Dec. 1, please click here.
 (Reporting by Rachel Savage and Bhargav Acharya; Additional
reporting by Nelson Banya in Harare; Editing by Alexander
Winning, Raissa Kasolowsky and Lincoln Feast.)
 ((Rachel.Savage@thomsonreuters.com))