The Zambia External Bondholders Committee meets on Friday to decide whether to accept or reject Zambia’s plan for repaying $3 billion of outstanding Eurobonds.
Zambia missed an interest payment last month on $1 billion of bonds due in 2024. A 30-day grace period expires on Friday, and should the vote go against Zambia and it doesn’t pay, it would put the country in default, giving investors the right to demand immediate repayment of the principal.
If Zambia does default it would become Africa’s first country to default on sovereign debt since the coronavirus pandemic.
Zambia was already struggling with its $12 billion external debt load. But coronavirus has aggravated pre-existing financial pressures in the country.
Sarah-Jayne Clifton, director of the Jubilee Debt Campaign, said creditors lent to Zambia at high interest rates knowing the debt would probably become too great. She’s calling for debt relief for the world’s poorest countries.
“That risk has now materialized, and bondholders must now accept a significant debt write-down,” she told the Reuters news agency this week.
“It is simply immoral for bondholders to demand full repayment and to make huge profits on Zambia’s debt while the country struggles with COVID-19, a major economic crisis and spiraling poverty levels,” she added.