Zambia Set to Finalize $3 Billion Bond Restructuring by End of May

Zambia is poised to complete the restructuring of its $3 billion international bonds by the end of May 2024, according to Felix Nkulukusa, Secretary to the Treasury. The country reached a preliminary deal with a group of bondholders in March, bringing it closer to resolving its long-delayed debt rework.

Why this matters: The successful completion of Zambia's bond restructuring will have significant implications for the country's economic stability and its ability to manage its debt. It will also serve as a test case for the G20's Common Framework process for reworking low-income countries' debt, potentially influencing the approach to debt restructuring in other countries.

The restructuring process involves swapping three existing instruments into two amortizing bonds, with one delivering higher repayments if Zambia's economic outlook and debt management capacity improve. The deal needs to be sent to all bondholders for voting, either as brand new bonds, an exchange offer, or as amendments to bonds already held, known as a consent solicitation.

Nkulukusa expressed optimism about the process, stating, "If all goes well with the bondholders, we should sign all the documentation by the end of this month." Zambia also aims to finalize the process with a second category of lenders, including Chinese banks, by the end of August, and with the remainder by the end of the year.

Zambia defaulted on its debts in late 2020 during the COVID-19 pandemic, and its restructuring has been seen as a test of the G20's Common Framework process for reworking low-income countries' debt. The process has been held up multiple times, but the March bondholder deal brings Zambia closer to resolving its debt issues.

In addition to the $3 billion in international bonds, Zambia has $3.3 billion of commercial non-bond debt. Chinese creditors, including China Development Bank and Industrial and Commercial Bank of China, as well as western banks such as Standard Chartered, are among the country's lenders.

The successful completion of Zambia's bond restructuring by the end of May would mark a significant milestone in the country's efforts to put its debt on a more sustainable path. The deal with bondholders and progress with other creditors signal positive steps towards resolving Zambia's debt challenges and restoring economic stability in the wake of the pandemic.