China under pressure to restructure loans to Zambia, analysts say

Like many African nations, Zambia has borrowed heavily from China to finance projects under Beijing’s Belt and Road Initiative

Country is seeking US$1.3 billion in financial assistance from the IMF and a six-month moratorium on interest payments on US$3 billion worth of Eurobonds

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Zambia’s debt problems began with a slump in the price of copper, its principal export. Photo: Getty Images

Published: 9:00pm, 27 Sep 2020Updated: 9:00pm, 27 Sep 2020

China is expected to come under pressure to restructure loans it has advanced to Zambia after the southern African nation asked bondholders for a six-month moratorium on interest payments on US$3 billion worth of Eurobonds.

The country was facing a “very challenging macroeconomic and fiscal situation” and needed “breathing space” to allow time for a restructuring plan to be agreed, the Zambian finance ministry said on Tuesday.

Lusaka was seeking US$1.3 billion in financial assistance from the International Monetary Fund and had applied to the G20 Debt Service Suspension Initiative (DSSI), of which China is a member, for a moratorium on debt repayments, and was pursuing a similar agreement with its commercial creditors, it said.

When asked for a comment, China’s foreign ministry did not specifically mention the debt restructuring issue but said the two countries were in talks.

“We are now engaged in friendly discussions with Zambia and we will do our best to assist Zambia to overcome the difficulties brought by the coronavirus,” it said.

Analysts say China, which is Zambia’s biggest single lender, is likely to come under pressure to restructure the loans.

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