• China’s internal coordination issues slow debt relief: sources
  • China promises int’l cooperation over Zambia’s debt
  • Zambia says debt restructuring is urgent

LONDON/PARIS, May 31 (Reuters) – China’s lack of experience with delicate debt restructuring and slow coordination among its official lenders are delaying debt relief for Zambia, a test case for the top emerging markets creditor, three sources familiar with the matter said. .

Zambia in 2020 became the first country to default in the era of the COVID-19 pandemic, struggling with a debt burden worth 120% of GDP. Its external debt exceeded $17 billion at the end of 2021, a third of which was owed to China, according to Zambian government data.

China agreed last month to co-chair Zambia’s official creditors’ committee with France, a move hailed by the Zambian government, which has made tackling the country’s debt a priority since coming to power last year. last. Read more

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Investors in emerging markets and other debtor nations are watching Zambia’s case closely for signs of leniency from Beijing in the future with overstretched borrowers.

China has become the largest public lender to African countries over the past decade, extending $160 billion in credit since 2000, according to researchers at Boston University.

“There’s a learning curve for China and that’s something we have to recognize,” said a French official, who declined to be named due to the sensitivity of the issue.

The official also cited “delays in China’s internal processes,” adding, “we also need to have better coordination between China itself, because there are a lot of agencies that have lent.”

While the creditors’ committee has yet to hold its first meeting, G7 finance ministers called on China to “contribute constructively” to the debt relief process after a meeting in Germany this month . Read more

China’s Foreign Ministry said in a statement emailed to Reuters that the country attached “high importance to Zambia’s debt concerns and supported multilateral efforts to resolve its debt problem”.

“COSTLY PREVIOUS”

Another source familiar with the situation said while China’s central bank was willing to move forward, the finance ministry was wary of ‘setting an expensive precedent’ elsewhere if it accepted big loan losses. granted to Zambia.

The source added that the Ministry of Finance is monitoring China’s development banks in particular, through which much of China’s credit is provided.

A third source familiar with the situation told Reuters that alongside coordinating its many lenders, China has been reluctant to participate in the Group of 20 Major Economies multilateral debt process, compared to bilateral negotiations where it can also focus on the country’s broader strategic goals. .

China’s Foreign Ministry did not specifically respond to questions about whether the delays were partly due to internal coordination issues and reluctance to accept loan losses.

The case of Zambia will probably be followed closely in other countries. Sri Lanka, for example, defaulted on its debt for the first time this month and owes money to a mix of creditors including China, India, Japan and Euro-holders. obligations. Read more

Zambia reached a staff-level agreement with the International Monetary Fund on an extended $1.4 billion credit facility in December, but the money cannot flow until Lusaka and its creditors come together. agree on reducing the debt to sustainable levels.

“China stands ready to work with the international community and continue to provide Zambia, within its capabilities, with the necessary support to deal with its current practical difficulties,” the Chinese Foreign Ministry statement said.

Zambia’s finance minister has repeatedly said he hopes negotiations will be concluded by the end of June, a timetable analysts say is ambitious.

“Our debt burden is stifling the growth potential of our country and the debt restructuring exercise is becoming more urgent by the day,” Zambia’s finance ministry said in an emailed statement in response to questions. on China’s role in the debt process.

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Reporting by Rachel Savage and Leigh Thomas; Additional reporting by Marc Jones in London, Yew Lun Tian in Beijing and Chris Mfula in Lusaka; Editing by Alison Williams

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