Zambia wins deferral on China Development Bank loan repayments

Zambia has reached deal to defer debt repayments that were due this month on a loan from the China Development Bank (CDB), Zambia’s government said, without giving the size of the loan or the debt repayments that were due.

As of June 2019 Zambia owed CDB roughly $311 million, or about a tenth of the $3 billion of Chinese lending to Zambia, according to the latest available finance ministry figures. It was not clear whether the loan in question covers all of this debt or a fraction of it.

China holds about a quarter of Zambia’s foreign debt.

“Under the terms of our agreement with CDB, interest and principal due on 25th October 2020 will be deferred,” the government said in a statement. “The deferred interest payment is now payable on 25th April 2021 and the deferred principal rescheduled over the life of the facility.”

Zambia, one of the world’s top copper producers, has been plunged into a debt crisis as the COVID-19 pandemic hurt its economy and exposed its public borrowing as unsustainable.

Holders of its Eurobonds are embroiled in a standoff with the government that the markets fear could trigger a default. One of the sticking points has been whether other key lenders such as China would also agree to reschedule repayments.

“This should be viewed positively by the market, since expectations from China were low. But really, one six-month deferral won’t help much,” an analyst following Zambia’s debt negotiations said.

Zambia missed a $42.5 million coupon payment on one of its Eurobonds that was due on Oct. 14 but has a 30-day grace period before it goes into default. The southern African country has asked Eurobond holders to defer interest payments until April 2021, but they have so far rejected the request.

Zambia’s external debt is nearly $12 billion, including $3 billion of outstanding Eurobonds, $3.5 billion of bilateral debt, $2.9 billion of other commercial debt and $2.1 billion owed to multilateral institutions.