(Bloomberg) – Zambian Finance Minister Situmbeko Musokotwane has urged other African nations to consider using the Group of 20 Common Framework mechanism to restructure unaffordable debt to act quickly.
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Africa’s first pandemic-era sovereign defaulter used the model to rework external liabilities totaling $12.8 billion.
In recent weeks, Nigeria and Ghana have announced that they are considering reorganizing their liabilities. Rising interest rates and a soaring dollar could push more countries into default as they struggle to pay for imports from fuel to food.
The Common Framework is the best option for governments in poor countries, although progress has been slow, Musokotwane said in an interview.
“I encourage my colleagues in other African countries not to hesitate but to come forward and solve their problems,” he said in Washington, where he attends the annual meetings of the World Bank and the International Monetary Fund. “This is the only viable option currently available to countries to resolve their debt unsustainability.”
Musokotwane’s endorsement comes after criticism that the process moved too slowly. Zambia has struggled to complete a complex debt restructuring since the process began more than two years ago. The country has secured a crucial $1.3 billion aid package from the IMF and has been assured by a committee of bilateral creditors that it is willing to negotiate, but has not yet agreed terms and conditions of any agreement.
The government must also negotiate with the holders of its $3 billion in Eurobonds, as well as other commercial creditors.
“We are doing everything we can” to sign a memorandum of understanding with official bilateral creditors, Musokotwane said. “I will be very happy if it can happen before the end of this year.”
Zambia’s restructuring is a test of how Chinese creditors will negotiate with other bilateral lenders and bondholders. The government is one of three in the world to use the G-20 framework as a coordinating mechanism to rework liabilities. Chad and Ethiopia are the other two.
Chinese lenders account for more than a third of Zambia’s external debt, according to the Ministry of Finance. The government is not seeking to rework all of its dollar liabilities, including those owed to multilateral development financial institutions, the ministry said Oct. 7.
“We take comfort in the fact that there is commitment and everyone realizes that this is really the way,” Musokotwane said. “There is no other way for Zambia to go if we are to achieve debt resolution.”
The nation hopes to hold its third official meeting of the creditors’ committee “in weeks rather than months”, he said.
Zambia said last week it needed external creditors to reduce the net present value of their loans by $6.3 billion, or 49% of the face value of the external debt of $12.8 billion. that the government is trying to restructure.
Negotiations on the relief have yet to begin and preparations are underway to schedule meetings, the finance minister said.
More key quotes from the interview:
On the common framework: “For us, it has taken us from a situation where a year ago things looked bleak to now, where there is so much interest and optimism about what is happening in Zambia. This gives me hope that we are heading in the right direction.
On the timeline for concluding the debt restructuring: “We will continue to push very hard that if it happens before the end of this year, great. If that happens in the next quarter, we won’t be very happy but at least we would have moved. But we will continue to push as hard as we can to get there as quickly as possible. »
On Zambia asking for a 49% reduction in the net present value of the debt it seeks to restructure: “We realize that this is what is needed to get the job done right.
“The process to resolve this debt issue is obviously very important. It is truly a step forward, too, to solving the problems of the economy and making Zambia once again a respectable participant in the global economy.
(Updates with quotes from the Minister of Finance at the end)
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