Debt restructuring: Is Zambia victim of China-US showdown?
Published On March 15, 2023 » 352 Views» By Times Reporter » Business, Columns
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•PRESIDENT Hakainde Hichilema with IMF managing director Kristalina Georgieva (right) at State House in Lusaka during her recent visit to Zambia.

There is an African saying which goes like, ‘when [two] elephants fight, it is the grass that suffers.’
Indeed, when two powerful forces are at loggerheads, the effects may be on the innocent and uninvolved ones either directly or indirectly.
Could this be the case for Zambia’s debt restructuring exercise with the official external creditors which has protracted for far too long now?
Seemingly, at play, are China and the United States (US) as well as some international financial institutions like the World Bank and the International Monetary Fund (IMF).
Zambia has, apparently, found itself in the middle of these international giants who are each pulling in different direction while the southern African country continues desiring debt relief through debt restructuring.
Admittedly, both the US and China have a big role to play in helping to unshackle Zambia from the current debt bondage – left by the Patriotic Front administration – so that it could live above financial troubled waters and chart development.
This is because Zambia urgently needs debt relief to restore medium-term debt sustainability and attract the new investment needed for growth and jobs.
According to the Joint WB-IMF Debt Sustainability Analysis (DSA), Zambia requires $8.4 billion in debt relief in 2022-2025 and additional relief through to 2031.
The World Bank notes that Zambia requested a debt treatment under the G20’s Common Framework and launched fiscal and structural reforms to restore macroeconomic stability and reinvigorate growth.
Remarkably, the Government has improved fiscal discipline, public financial management, and transparency, including in debt management and reporting.
It has also implemented structural reforms focused on removing market distortions and fighting corruption.
In the special interview during her January visit to Zambia IMF managing director, Kristalina Georgieva, told me that Zambia is seeking a reduction in its debt burden from its external creditors, through the G-20 Common Framework for debt treatments.
Ms Georgieva said discussions were complex and challenging, but that Zambia was doing its part and hoped to see an agreement in the coming months.
China co-chairs a committee of official bilateral creditors with France as part of a debt restructuring that Zambia is seeking under the Group of 20’s Common Framework.
While addressing University of Zambia students during the same trip, Ms Georgieva, subtly and diplomatically referred to China when she said: “Zambia is doing everything right. Now is the time for the creditors of Zambia to do their part and complete that restructuring to give more space for Zambia to grow.”
But US Treasury Secretary Janet Yellen, whose trip to Zambia had coincided with that of the IMF boss, was not so subtle on the issue.
According to Dr Yellen, the US was concerned over the protracted issue of the negotiations between Zambia and its official creditors, including China, for the current debt restructuring.
She said it was for that reason that she, while in Zurich, Switzerland, a few days before, had a meeting with her Chinese counterpart on the matter.
Elsewhere during the trip she was quoted as having accused China of being a “barrier” to ending Zambia’s debt crisis, saying that the situation had “taken far too long” to resolve.
In response the spokesperson for Chinese Embassy in Zambia said for Zambia’s debt related to China, China has been active in co-chairing the Official Creditor’s Committee under the G20 Common Framework.
The spokesperson stated that China is working hard with other parties to seek a sustainable solution in line with the principle of common actions and fair burden-sharing.
The spokesperson stated that China’s efforts have made some positive progress and indicated that China looked forward to US’ constructive role in the process.
According to the Chinese embassy even if the US one day solves its debt problem, it is not qualified to make groundless accusations against or press for other countries out of selfish interests.
That according to the spokesperson was because it cannot at all alleviate US’ tremendous responsibility for the reason of the world debt issues.
To further counter the West’s challenge on Zambia’s debt issue, China called for multilateral development banks, including the World Bank, to offer debt relief to the copper-rich country.
China believes that the key to resolving Zambia’s debt crisis lies in the involvement of both multilateral financial institutions and commercial creditors in debt-relief efforts.
In a statement, the Chinese foreign ministry spokesperson, Mao Ning, points out that multilateral institutions and private creditors hold the majority of Zambia’s foreign debt, accounting for 24 per cent and 46 per cent respectively.
“They combined hold the bulk of Zambia’s foreign debt. The key to easing Zambia’s debt burden thus lies in the participation of multilateral financial institutions and commercial creditors in the debt relief efforts,” she says.
Chinese officials believe that China’s push for debt relief for Zambia is a clear sign of its determination to reform the global system for restructuring sovereign debt, which has traditionally excluded lending by multilateral banks.
Sadly, this stance may lead to increased tensions with the World Bank and further delay the already protracted debt talks.
In fact, World Bank President David Malpass is reported to have rejected China’s call for the World Bank to offer debt relief to Zambia, stating that there is no mechanism to do so and that this has already been actively discussed and rejected at the G-20.
However, Ms Mao has emphasised the importance China places on resolving Zambia’s debt crisis and its role in handling the country’s debt under the G-20 Common Framework.
The G-20 Common Framework is an initiative that brings together the Paris Club of traditional rich lender countries, private creditors, and China to restructure the debts of low-income countries.
China has also highlighted the importance of Africa’s debt issue in the context of development.
The Group of 20 leaders has emphasised the importance of private and official bilateral creditors providing debt treatments that ensure fair burden sharing.
The Zambian debt talks are being closely monitored as they are seen as a test case for other countries in similar situations.
But given what is playing out, can Zambia, in this debt issue, be said to be a victim of the showdown between two superpowers?
Look out for the next article as we get views from economic experts on the matter.
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