Zambia’s debt restructuring is still hampered by issues with Afreximbank
One of Zambia’s senior financial officials told Reuters that the country’s debt restructuring is still stuck in its difficult talks with the African Export-Import Bank and won’t be finished until the following year.
However, Lusaka has been unable to finish the process and escape default due to an unresolved dispute over whether Afreximbank and the Trade and Development Bank, like the World Bank and International Monetary Fund, should also suffer or be exempted from writedowns.
In an interview in London late Thursday, Zambia’s Secretary to the Treasury, Felix Nkulukusa, stated, “Unfortunately, we are a guinea pig.” “Everything is being tested on us.”
CREDIT RATING CUT IN AFREXIM FEARS
According to Nkulukusa, there hasn’t been much movement with Afrexim, which worries that its credit rating will be severely damaged if it is no longer considered to have “preferred creditor status,” even though more extensive talks with TDB began two months ago.
Generally speaking, it helps government-backed development banks by providing them with an extra degree of security, allowing them to lend at lower interest rates, and supporting projects that commercial banks might avoid because they are too hazardous.
Just under 8% of the debt Zambia has designated for restructuring is made up of Afrexim and TDB, but given the stakes, this is proving to be a challenging deadlock to break.
“We are still stuck,” stated Nkulukusa. “Afrexim and TDB, that is what remains (to be resolved) and probably that will take us into 2026,” he stated, adding that he was “very positive that everything will get sorted out next year” .
That will probably coincide with a build-up to the August presidential election, which Hakainde Hichilema’s administration is currently expected to win.
Zimbabwe wants to extend its IMF bailout.
Additionally, it is negotiating a one-year extension of its current $1.3 billion bailout package, which expires in January, with the International Monetary Fund. That would enable whoever wins to agree to a new, longer-term IMF arrangement after the election.
Nkulukusa claimed that following a terrible drought and default in recent years, Zambia’s economy was finally recovering.
Its GDP is predicted to increase by 5.8% this year and 6.4% in 2026. The mining industry’s profits have contributed to the exchange currency’s stabilization, and inflation is expected to drop from its current rate of about 13% to roughly 7% by early next year.
Restoring investment to the nation and financing plans for significant road and rail upgrades now depend on breaking the impasse over restructuring.
According to Nkulukusa, given the significance of Afrexim and TDB for the area, supporting them may eventually call for a pan-African or global solution.
Reverting to a previously proposed plan in which the banks provide Zambia more concessional loans, as the World Bank and others usually do in restructurings, is an alternate choice.
Nkulukusa stated that lessons will be gained from the current situation and that, considering the significance of TDB and Afrexim for the area, a pan-African or international solution may eventually be needed to support them.
“There will be some efficient and effective way that will be able to protect these institutions while contributing towards the restructuring for those countries that will have challenges.”
