Zambian debt negotiations hit potential sticking point over treatment of Chinese lender
- Beijing is expected to push the IMF to allow China Development Bank to be treated like other commercial lenders rather than a state-backed one
- The issue is likely to set a precedent for other indebted nations and Beijing is unlikely to want to face a series of demands to cancel debts outright
China rarely cancels concessional or commercial loans and prefers to vary lending terms, such as lengthening the repayment period or reviewing interest rates.
However, under the Group of 20’s Common Framework for debt restructuring it is likely to come under pressure from other lenders to agree to a debt haircut – a reduction in either interest payments or the amount repayable.
China is the single biggest lender in Zambia, with loans of more than US$6 billion out of the country’s total US$16.8 billion debt as of December 2021.
Lusaka is also asking bilateral and external private lenders to cancel US$8.4 billion of its debt payments between 2022 and 2025 to return its debt to sustainable levels. The International Monetary Fund’s debt sustainability assessment for Zambia also says it will need further cancellations until 2031.