Zambia Central Bank Gov: Equal Treatment to Blame for Default

Zambia’s Central Bank Governor Christopher Mvunga said the need to treat all of its creditors equally is the reason why the government couldn’t repay bondholders a $42.5 million interest payment that was due last Saturday. “One of the conditions is that all creditors have to be treated equally. … It’s not that we could not pay. It’s just that if we pay one creditor then we need to pay all the creditors,” Mvunga told a news conference on Wednesday.

The question of equal treatment has been a major sticking point from the beginning of the current Zambian debt crisis. Private creditors complained that the government’s lack of transparency about its debts to China made it impossible for them to consider restructuring the bond debt. They worried that the Zambian finance ministry would simply use proceeds from delayed bond repayments to funnel money to the Chinese.

China’s top diplomat for sub-Saharan Africa, Wu Peng, tried to soothe those anxieties in an October 20 Tweet when he committed to the “equal treatment of creditors principle.”

Zambia has reached two debt repayment deferrals with China’s leading policy banks and has yet to finalize a debt restructuring deal with the International Monetary Fund.

Other Zambian Debt Crisis Updates:

  • TECHNICALLY IN DEFAULT, BUT NOT OFFICIALLY (YET): Although Zambia missed a scheduled bond payment on Saturday, it’s still not a certified default. “Technically they are in default, but officially it needs to be declared (by a special panel) which consists of credit analysts from major investment banks,” said Robert Besseling, Johannesburg-based executive director of EXX Africa, a political and economic risk consultancy. (GUARDIAN)
  • HERE COME THE DOWNGRADES: On Wednesday evening, ratings agency Fitch downgraded Zambia’s long-term foreign currency rating to “restricted default”, citing non-payment of the coupon on the 2024 Eurobond. (REUTERS)
  • ZAMBIA PREPS FOR LEGAL BATTLE: With a reported 90% of the Zambian Eurobonds falling under UK legal jurisdiction, the government is preparing to be taken to court in London by bondholders. “There are some risks associated with the decision not to pay. These include bondholders taking legal action to enforce their rights under the financing arrangements,” said Ng’andu told the parliament and added that his ministry is working closely with legal advisers to respond to this possibility. (REUTERS)

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The post Zambia Central Bank Gov: Equal Treatment to Blame for Default appeared first on The China Africa Project.



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