Zambia has become the first African country to ask bondholders for relief since the onset of the coronavirus, raising fears of a wave of defaults rippling through the continent as a decade-long debt binge unravels.
In a press address by President Edgar Lungu he asked Eurobond to give them time to plan a debt restructuring until April while it plans a restructuring of its debt .
In a report issued by the government, they said the country was facing unprecedented liquidity constraints which are as result of the Covid-19 pandemic. The decline in revenues and increased unbudgeted costs caused by the Covid-19 pandemic resulted in a material impact on the government’s available resources.
The southern Africa country had last month secured a debt-suspension deal up to the end of the year from some official creditors. As a result , Zambia was also obliged to seek comparable terms with commercial lenders.
According to Mukuli Chikuba, permanent secretary at the finance ministry. Asking for a suspension of interest payments doesn’t amount to default of the debt.
Zambia said it will however pay its bondholders $0.50 per $1,000 in bond principal they hold if the debt suspension plans are approved.
Zambian Finance Minister Bwalya Ng’andu is due to present the 2021 budget on Friday, which could offer insights into the government’s restructuring strategy and chances of winning an IMF bailout.
