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IMF and Lusaka Talk about the Chinese Loan

The IMF launched formal negotiations with Zambia for a loan to help service $12bn in external debts on Thursday. Three weeks of virtual talks will revolve around extending a credit facility to Zambia, which became the first African nation to slide into default since the pandemic after missing a coupon payment on a $42.5m Eurobond, one of $3bn such loans it has received. In order to consider a sustainable program, the IMF will want to know the extent and composition of the country’s debt, including sovereign debt and state-owned enterprise debt, says Eric Olander, co-founder and managing editor of the China Africa Project. “It’s all going to come down to transparency. If the Chinese are up front about their loan portfolio in Zambia then it will ease the pressure on private creditors and the IMF to act, but so long as they all think that any debt relief will be used to repay the Chinese, then it’s hard to see that any meaningful progress will be made in these upcoming talks.” Lusaka applied to the IMF for a bailout package in December at a time when its debt load was 120% of its GDP. This month, Zambia also requested a debt restructuring under the G20’s new common framework designed to tackle unsustainable debt. The copper producer owes $3bn in outstanding Eurobonds, $3.5bn in bilateral debt, $2.1bn to multilaterals and $2.9bn to other commercial lenders, according to Reuters. In addition, Zambia owes around $3bn to Chinese state-owned and private lenders, accounting for more than 25% of the total debt load, according to S&P Global Ratings Services.