African countries and their creditors have their eyes set on Zambia, which in the coming weeks could become the first defaulted country since the Covid-19 crisis. Lusaka this week asked its creditors to postpone the deadlines for a tranche of three billion euros of loans in Eurobonds.
At the same time, Zambia is reluctant to settle arrears of payments to its Chinese creditors. If there is no agreement, the country says it will no longer be able to pay its debt.
The Zambian case highlights the inadequacy of the measures taken so far by the rich and new countries. A default on Zambian debt would have consequences throughout Africa.
In a few weeks, Zambia has become a symbol of the financial crisis that threatens developing countries. Lusaka has just announced that they could not settle arrears with debt payments unless an agreement with two categories of creditors, China and private creditors.
Beijing has set as a precondition for any restructuring of the settlement of 200 million euros in arrears, which Lusaka says it is unable to do. The country is in debt of $ 12 billion, a third of which is to China. It is suffocated by deadlines at a time when its export earnings are declining.
The second largest producer of copper in Africa has also borrowed heavily in the financial markets by issuing Eurobonds. More than three billion euros to be started back. Lusaka has requested a moratorium from its private creditors, mainly banks. But for now, the bankers deny they want Lusaka to sign an agreement with the IMF first. The Zambian case is likely to be repeated on a larger scale in Africa. At least a dozen African countries are in secret negotiations with Beijing to restructure their debt.