Zambia will restructure its debt with regional lenders including the African Export-Import Bank and remain in default on those payments until it completes the process, Finance Minister Situmbeko Musokotwane said.
Its stance — similar to Ghana’s, which is overhauling its own loans — is at odds with Afreximbank’s position that its “preferred-creditor status” means it shouldn’t have to absorb losses like other commercial lenders. The dispute may set a precedent for how Afreximbank and similar lenders on the continent have their debt treated in other restructurings.
“We have to adhere by the rules agreed upon with all the creditors — inasmuch as we would want these African banks to have a preferential status, but that’s not our decision,” Musokotwane said in an interview in Abidjan on Tuesday. “That was not the decision of Zambia. That was the decision of the creditors — all of them.”
Both Zambia and Ghana are restructuring their loans under the Common Framework, which the Group of 20 mostly wealthy nations devised to help poor countries rework unsustainable debt in the wake of the Covid-19 pandemic. Its guidelines aim to help coordinate the process across diverse creditor groups and ensure none receive undue favorable treatment.
While Zambia and Ghana have secured deals with official bilateral creditors and bondholders, they’re still wrapping up talks with their remaining commercial lenders. In Zambia’s case, that includes at least $543 million owed to the Eastern and Southern African Trade and Development Bank, known as the TDB, and more than $45 million to Afreximbank.
Neither lender responded to emails seeking comment.
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Afreximbank Managing Director Chandi Mwenebungu told investors on a call earlier this month that the Cairo-based lender’s establishment agreements enshrined its preferred-creditor status, and that it wasn’t part of any restructuring in Ghana, Malawi or Zambia. All three were “up to date” on their payments, he said.
Hannah Ryder, founder of Africa-focused consultancy Development Reimagined, questioned why the continent’s lenders should face losses when the International Monetary Fund and World Bank don’t, despite the latter’s stronger capital bases that are better positioned to manage a default.
“When you have a proportion of Ghana’s debt — which is the part that’s effectively owned by other African member states — that should be restructured, you kind of question what we’re trying to achieve,” she said Wednesday.
Afreximbank counts both member states and private investors among its shareholders, and lends at relatively high rates compared with the IMF and World Bank.
Creditor Status
Ultimately, it’s up to the other lenders to recognize Afreximbank or the TDB’s claimed preferred-creditor status, said Chris Humphrey, a senior research associate at ODI Global, who published a paper on the dilemma in January. In Zambia’s case, the government said its creditors decided the debts were commercial and up for treatment.
“It was agreed that Afreximbank and the Trade and Development Bank do not have preferential status, their lending is more or less commercial,” Musokotwane said on the sidelines of the African Development Bank’s annual meetings. “We can’t service their debt until we agree on the restructuring.”
Zambia’s economy is still emerging from a bruising debt-restructuring process that’s dragged on since it became Africa’s first pandemic-era sovereign defaulter in 2020. It’s also recovering from last year’s drought — the country’s worst in more than a century.
The rains have since improved, with the government forecasting a record corn harvest, which may return annual inflation to single digits this year, Musokotwane said. It’s been above 10% since July 2023 and held steady at 16.5% in April.
“I think we’ll see inflation quickly dropping,” he said. “This has been a very positive year and this will play itself out in the rest of the year.
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(Updates with comment from eighth paragraph.)