Zambia’s move to cancel $1.6 billion in yet-to-be disbursed Chinese loans signalled Beijing’s willingness to compromise in negotiations to resolve the southern African country’s debt crisis, analysts have said.
President Hakainde Hichilema’s government this week cancelled loans from the China Exim Bank and Industrial Commercial Bank of China to help manage its debt overhang.
The cancellation of the undisbursed loans, which will see Zambia halting the construction of several roads, highways and information and technology projects funded by Chinese lenders, came a few days after international financiers agreed to provide debt relief to the country.
Analysts said the latest developments around the Zambia and China debt relief negotiations could also provide an insight into how Beijing will deal with similar crises across Africa.
“Ongoing negotiations to restructure Zambia’s debt are most likely to end in a compromise that will offer insight into China’s potential position in other countries’ creditor talks, especially if Beijing decides to grant debt forgiveness to Lusaka,” said the Rane Network, a geopolitics intelligence solutions provider in its latest review.
“The cancellation of undisbursed funds is tangential to the ongoing restructuring talks over Zambia’s estimated $32 billion in debt (money that has already been spent by the Zambian government),” the network added.
“But China’s participation under the G-20 Framework and willingness to engage- even if only over undisbursed loans — could bode well for future talks.
“Given that Zambia was the first African country to default on its debt in the Covid-19 pandemic era and is also the first country to have China co-chair its debt committee, the outcome of debt negotiations will provide a case study for understanding how China could treat restructuring in other African countries.”
In December last year, the International Monetary Fund gave the Zambian government a $1.4 billion support package, but the Bretton Woods institution said it will not disburse the money until the country’s creditors agreed to a debt restructuring exercise. About 18 different Chinese creditors hold $6.6 billion in Zambian debt, the Rane Network said. Negotiations to restructure Zambia’s $17 billion external debt have dragged on and China has been largely accused of lack of commitment to resolving the crisis.
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