Zambia Debt Default Looms As Crucial Vote Postponed

The likelihood of Zambia defaulting on its debts loomed even larger yesterday as a vote on debt relief was postponed after bondholders failed to reach quorum.

The meeting will be reconvened on November 13th, at which point Zambia hopes to reach an agreement with its creditors. 

The 13th is also the deadline for Zambia to make a coupon payment which it skipped on October 14th. If the payment is not made, Zambia will officially be in default and bondholders will have the right to demand the immediate repayment of their principal investments. 

Last month the government told bondholders it would not be able to meet its obligations without a six-month interest freeze. The offer was refused. 

If Zambia defaults next month, it will be the first African nation to do so since the Covid-19 pandemic began. 

The government has said it is treating all creditors equally, however bondholders are concerned that any relief would be used to service debts to Chinese state lenders, which form approximately 1/3rd of the country’s liabilities.

“The real way forward is to increase transparency and adopt a multi-pronged approach that includes bondholders, the international finance institutions and China, just like Ecuador did,” said Simon Quijano-Evans, a London-based chief economist at Gemcorp Capital LLP.

“We have no visibility on the use of proceeds if we agree to a debt standstill,” concurred Kevin Daly of Aberdeen Standard Investments in London - a major Zambian Eurobond holder.

Zambia’s $1 billion of 2024 Eurobonds had fallen 0.8% to 43.9 cents on the dollar by 13:56 GMT yesterday.