Zambia to emerge from debt default as bondholders back US$3bn restructuring

Zambia's ministry of finance yesterday said more than 90% of holders of its US$3 billion in outstanding international bonds had accepted its restructuring proposal, paving the way for it to emerge from a lengthy default.

The country defaulted more than three years ago and is reworking its debt under the G20 Common Framework - a platform to bring together creditors like China and developed creditor nations, known as the Paris Club, to ensure swift and smooth debt overhauls for low-income countries.

Zambia was widely seen as a test case for the G20 plan, but the process had been beset by delays, curbing investment and economic growth and weighing on local financial markets. A devastating drought worsened the situation.

"Finalising this agreement with bondholders will create the fiscal breathing space necessary for Zambia to remain on a trajectory of sustainable economic growth," finance minister Situmbeko Musokotwane said in an online statement.

"Nearly four years since we initially defaulted on our eurobonds, the close of the restructuring chapter is in sight."

Voting on the proposal ends tomorrow, 30 May, but on the basis of instructions the government received by 24 May, it expects its proposal to be "approved at the relevant meeting", the ministry said in a regulatory statement.

Under the plan, bondholders will swap three existing instruments due to mature in 2022, 2024 and 2027 into two amortising bonds.

Zambia secured a US$1.3 billion loan from the International Monetary Fund (IMF) in 2022, which required it to restructure its debt with other creditors. Its international bonds traded unchanged, with the 2024 bond indicated at 63.4 cents in the dollar and the 2027 maturity at 75.9 cents, according to Tradeweb data.

Spokespersons for the IMF and a group of bondholders did not immediately respond to a request for comment.