LUSAKA: The head of the International Monetary Fund said on Tuesday that it had reached an understanding in principle with China about plans to restructure Zambia’s debt, urging creditors to “do their part” to strike a deal.
Kristalina Georgieva made the comments during a visit to Zambia, which has been implementing an IMF reform programme put in place after it defaulted on its sovereign debt in 2020, the first African country to do so during the pandemic.
“Zambia has done its part under the IMF programme and the country has performed really strongly, and now it’s time for creditors to do their part,” Georgieva said during a public discussion at the University of Zambia.
She added that the outline of a plan had been agreed with China, which is owed almost $6 billion by Zambia and is one of its main creditors. Zambia’s total external debt stood at $17 billion as of June last year, government data shows.
“We have reached an understanding in principle that China will de facto accept NPV (net present value) reduction on the basis of significant stretching of the maturities and reduction of interest,” Georgieva said.
She said that, in general, there was not a consensus in China to accept upfront haircuts on debt it owned because China thought of itself as having significant development challenges.
On Monday, Georgieva met Zambian President Hakainde Hichilema and praised his government for moving away from wasteful expenditure, saying the IMF would like to work with Zambia to boost its economic growth.
U.S. Treasury Secretary Janet Yellen, who was also visiting Zambia, said on Monday it was critically important to restructure Zambian debt and she believed progress could be made after her frank talks last week with China.
Yellen said Zambia’s debt overhang was a drag on its whole economy and China had been a barrier to resolving the problem.
In response, the Chinese embassy in Zambia said “the biggest contribution that the U.S. can make to the debt issues outside the country is to act on responsible monetary policies, cope with its own debt problem, and stop sabotaging other sovereign countries’ active efforts to solve their debt issues.”