Zambia will meet with creditors today on a proposal to defer Eurobond payments.
After Zambia skipped interest payments on its debt last month, the country requested a six-month deferral on its $3 billion worth of dollar-denominated Eurobonds. Although the G20 agreed last month to review a debt-relief initiative for the poorest countries in 2021, the IMF has been reluctant to work with Zambia due to their lack of transparency regarding loans from China.
It is likely that Zambia will become the first African nation to default on its debt during the COVID-19 pandemic. The likelihood of this is increased due to the reticence of commercial lenders to support a delay of payment. Sluggish growth of copper prices — which account for 70% of Zambia’s export revenue — and bond values that have been halved since March indicate a financial crisis for the nation. Expect this to test the capacity of Western-dominated financial institutions like the IMF to keep developing nations in its sphere of influence while also ensuring debt compliance. However, it is increasingly likely nations like Zambia will pivot towards China for financial assistance, signaling further entrenchment of Chinese soft power in the developing world at the expense of the West.
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Ali is a Copy-Editor and Analyst on Daily Brief team, contributing regularly to the Daily Brief. He also leads the Foreign Brief Week in Review multimedia team. He focuses on political and development issues in the Middle East and North Africa.