Zambia has failed to secure a moratorium on its Eurobond debt from its private creditors. Zambia is one of the many countries that have become indebted to Eurobonds in recent years. As the IMF worries about an alarming rise in debt in Africa, several African countries could quickly default on their payments.
The event did not go unnoticed in the financial world. On September 29, Zambia’s private creditors refused a six-month moratorium on interest payments on Eurobonds issued by that country.
Eurobonds are bond issues launched in the financial markets and it is a product that is difficult to restructure because lenders are banks, mutual funds, sometimes also traders, and unlike public loans there is no no state to make a gesture in favor for borrowers.
The IMF is concerned
For the past ten years, eurobonds have been fashionable among African leaders, and many countries are currently in Zambia’s situation. They all followed close to the Lusaka debacle. The signal is all the more worrying as the current crisis is likely to lead to a number of defaults.
The International Monetary Fund has sounded the alarm again a note published Thursday. Private creditors, but also China, are urged to follow the G7’s path and take steps to reduce the debt of poor countries. For as the IMF’s CEO Geoffrey Okamoto says, “The more we push the problem back, the more we aggravate it.”
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