Zambia Seals Breakthrough Debt Relief Deal

Zambia has reached a landmark debt relief deal for its ailing economy, cutting interest rates to as low as 1% and extending repayments until 2043.

The agreement concerns only bilateral sovereign debt (between countries), as the African country owes about $6.3 billion to countries, including China.

Under the agreement, which was announced for the first time during last week's Paris summit, and some of its provisions were published by Bloomberg today, Zambia will pay interest rates of up to 1% until 2037, to rise later to a maximum of 2.5%.

Zambia was paying an average of 3.9% on its bilateral Chinese loans, according to estimates by Debt Justice, a British organization that campaigns to cancel loans for poor countries.

The maturities of the bilateral debt will also be extended until 2043, which is an average extension of more than 12 years.

The agreement is a historic achievement in light of the increasing number of countries that need restructuring.

Zambia was the first country to default on sovereign debt in pandemic-era Africa in November 2020, and has been in talks with the official creditors' committee for about a year.

Zambian President Hakinde Hichilema said today in front of a crowd of hundreds at the airport upon his return to Lusaka, the capital of Zambia: “It was an impossible task .. It was zigzagging, sideways, forward and backward, down and up .. but we kept our eyes on the ball.”

However, the agreement does not include debt cancellation, as Chinese lenders have resisted write-downs and preferred to extend payment terms.

The deal also includes provisions for higher interest payments (4% maximum) as Zambia's economy has performed better than expected.