Zambia’s creditors are expected to offer financial guarantees by the end of July


WASHINGTON, July 9 (Reuters) – Zambia’s official creditors are expected to offer it financial guarantees by the end of July, paving the way for the first G20 debt restructuring set up during the height of the COVID-19 pandemic, two sources briefed on the matter said.

Zambia would be the first of three countries to request debt relief under the Common Framework agreed by the Group of 20 major economies and the Paris Club of official creditors to move forward in a very slow process.

The creditor committees of Zambia, Chad and Ethiopia are due to meet this month amid growing pressure to speed up the debt restructuring process. read more

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No exact date has been set for the meeting of Zambia’s creditors’ committee, but sources familiar with the matter said they expected the African country to secure financial guarantees by the end of the month, and said private sector creditors were cooperating.

Russia’s war in Ukraine has sent food and energy prices soaring, exacerbating debt problems that already plague 60% of low-income countries and now threaten a growing number of middle-income countries.

A joint framework was set up in October 2020 to stop another major debt crisis, but progress has been slowed by the reluctance of China – now the world’s biggest sovereign creditor – and private sector creditors to participate, which has deterred other countries from seeking debt relief.

Experts say the move in Zambia could help boost interest among heavily indebted countries, especially given the growing risk of a global recession, higher interest rates and continued capital outflows from emerging market economies.

Improvements to the Common Framework will be a key topic at a meeting of G20 finance officials in Indonesia next week, but Zambia’s case is unlikely to be resolved before that meeting, sources said.

IMF and World Bank officials have been open about the Common Framework’s failings. They are calling for financial officials from major G20 economies to put more pressure on China and private sector lenders to participate.

Zambia’s Finance Minister Situmbeko Musokotwane said last week that the country’s economy would be severely compromised without external support.

A Paris Club source said earlier this week that a group of rich creditor countries was working to provide financial guarantees to the IMF that could unlock funds for Zambia.

“We hope it will be done before the end of July,” the source added.

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Reporting by Andrea Shalal; Editing by Sandra Mahler

Our Standards: The Thomson Reuters Trust Principles.



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