Zambia reaches debt deal with bondholders

The steering committee for Zambia’s bondholders and the Zambian government have announced they have reached an agreement to restructure Zambia’s debt, which has been accepted by public sector creditors.

Reacting to the announcement Tim Jones, Head of Policy at Debt Justice, said:
“Today’s deal is better than the first bondholder proposal that was rejected by creditor governments in October. But bondholders will still get paid back over 10% more than public creditors. Taxpayers around the world, from the UK to China, are subsidising private sector profit. Legislation is needed in the UK and New York to ensure private lenders give as much debt relief as the public sector.”

Tim Jones continued:
“This deal still needs to be agreed with all bondholders, and there is a further $1.5 billion owed to Western banks and financiers in other forms of debt. Pressure is urgently needed on these creditors to agree to debt relief.

“If the IMF and World Bank make minor changes in their assessment of global growth or Zambia’s economy, the people of Zambia will end up paying far more under the enhanced deals for creditors. Yet there is no automatic mechanism to reduce debt payments if circumstances are worse than expected. This is a major weakness of the deals which could lead to the need for more debt relief in the future.”

*** UPDATE 2 April 2024*** Debt Justice has released a more detailed analysis of the deal with bondholders.

Amount creditors
will receive for
every $1 owed
as of end-2020
– baseline
Amount creditors
will receive for
every $1 owed
as of end-2020
– enhanced deals
Today’s deal with bondholders62 cents93 cents
October 2023 deal with bondholders73 cents97 cents
Bilateral creditors55 cents87 cents

[Debt Justice has calculated the net present value of the new debt payment schedules, using a discount rate of 5%, from end-2020. These calculations therefore take account of no payments being made in from 2021-2023. These figures show the new net present value of the debt divided by the nominal amount owed as of end-2020, when the restructuring process began. For example, under the baseline deal agreed today we calculate that the new net present value of the debt claims for bondholders is 62% of the amount owed as of end-2020].

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