China calls for multilateral lenders to ease Zambia’s debt burden
- Beijing says these financial institutions and ‘predominantly Western commercial lenders’ hold the bulk of the African nation’s foreign debt
- It comes after World Bank chief David Malpass said China had been causing delays in Zambia’s debt restructuring negotiations
China has sought to distance itself from Zambia’s debt problems, saying most of the southern African nation’s burden is from multilateral lenders and commercial creditors.
Malpass said the delays were “frustrating” and that Beijing needed to move on from unfeasible demands, in an interview with Bloomberg TV. “It’s important for them to be focused on getting to an actual debt restructuring where the burden can be lightened for Zambia,” he said.
China hit back on Tuesday, saying multilateral financial institutions should offer Zambia debt relief – a call the World Bank has in the past rejected.
Citing Zambian finance ministry data, foreign ministry spokeswoman Mao Ning said multilateral financial institutions accounted for 24 per cent of Zambia’s foreign debt, while “predominantly Western commercial lenders” accounted for 46 per cent.
“The key to easing Zambia’s debt burden thus lies in the participation of multilateral financial institutions and commercial creditors in the debt relief efforts,” Mao told a regular press briefing in Beijing.
She said China attached high importance to the issue. “We have played a constructive role in handling Zambia’s debt under the G20 Common Framework,” Mao said, referring to an initiative between Group of 20 and Paris Club countries, private creditors and China to find solutions to the debt problems of low-income countries.
But in last week’s remarks, Malpass said China was causing delays by asking the World Bank and the International Monetary Fund to take losses in the Zambian debt restructuring.
“There is no mechanism to do that,” he said. “That in part is a delaying tactic or slows down the process. That has been discussed actively at the G20 and rejected. I hope they move on from that,” Malpass said in the interview.
He said those issues had been discussed when he visited China in December with Kristalina Georgieva, managing director of the IMF. “We had important meetings with the China EximBank and China Development Bank because they are two of the world’s largest creditors, and how to push forward with the process,” Malpass said.
Zambia became the first African country to default on some of its dollar-denominated bonds during the Covid-19 pandemic when it failed to make a US$42.5 million bond payment in November 2020. It has already stopped work on several Chinese-funded infrastructure projects and cancelled undisbursed loans to help manage the debt problem.
It has sought debt relief from the G20 and its top private creditors under the Common Framework. The process allows creditors to jointly renegotiate its foreign debt – even though China usually prefers bilateral negotiations – but the process has also been marred by delays since Zambia applied to join the framework early last year.
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, according to the IMF’s debt sustainability assessment for Zambia.
The restructuring has also been delayed by a Chinese push to have Zambia’s local-currency debt held by foreigners included in the deal. But Malpass said the domestic debt of countries was subject to their own laws.
“That has been taken off the table by Zambia, so for it to be brought in, is again slowing down the process,” he said.
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She urged China to agree to a rapid restructuring of loans to Zambia, adding that “many African countries are now plagued by unsustainable debt, and much of it is related to Chinese investments in Africa”.
But according to Beijing, Africa’s debt issues are essentially about development. Foreign ministry spokeswoman Mao said China’s financing cooperation with Africa had always been focused on improving the capacity for independent and sustainable development.
“Over the years, China has supported African countries on a large number of infrastructure and industrial projects as a source of investment and technology, which has visibly contributed to local economic development and people’s livelihoods,” she said, giving the example of the Kafue Gorge Lower (KGL) hydropower project in Zambia that was financed and built by China.
Mao said the project, which is already operating, “has generated significant economic benefits and contributed notably to Zambia’s fiscal revenue”.
“We believe that loans for projects like the KGL have helped to bolster Zambia’s debt sustainability, not otherwise,” she added.
China is the single biggest lender in Zambia – its loans accounted for more than US$6 billion of the country’s total US$16.8 billion debt as of December 2021. That money has gone into building massive infrastructure projects including airports, highways and power dams.
He said multilateral lenders and commercial creditors accounted for three-quarters of Africa’s external debts, citing World Bank data, and that “they can and should play a greater role in alleviating Africa’s debt problems”.
