- Zambia and France have signed a bilateral debt restructuring agreement.
- It's a significant step in Zambia's effort to revamp its $13 billion external debt.
- Under the agreement, Zambia will extend the maturity of its debt by an average of 12 years.
Zambia and France have signed a bilateral debt restructuring agreement, a significant step in Zambia's effort to revamp its $13 billion external debt. The deal marks progress in a process that began after Zambia became the first African nation to default during the COVID-19 pandemic in 2020.
This agreement, the first Zambia has reached with official bilateral creditors like China, Saudi Arabia, and India, is also the first under the G20's Common Framework for debt restructuring. The framework aims to coordinate diverse creditor groups but has faced criticism for its slow implementation.
Under the agreement, Zambia will extend the maturity of its debt by an average of 12 years, with repayments stretching beyond 2040. Interest rates are set at 1% for the next 14 years, rising to a maximum of 2.5% after that.
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Key Takeaways
The agreement underscores Zambia's commitment to tackling its debt crisis while showcasing the potential and pitfalls of the G20's Common Framework. By securing favorable terms, including low interest rates, Zambia creates breathing room for economic recovery. However, the protracted process highlights the challenges of coordinating diverse creditor groups, an issue that could impact other nations seeking similar relief.
