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Lusaka Thrown a Credit Lifeline

Zambia has reached a deal to defer debt repayments that were due in October on a loan from the China Development Bank (CDB), Zambia’s government said, without giving the size of the loan or the debt repayments that were due. Zambia owed CDB about $391m at the end of 2019 — about a tenth of the $3bn it owes Chinese entities — according to the finance ministry. It was not clear whether the loan in question covers all of this debt or a fraction of it. China holds about a quarter of Zambia’s foreign debt. Zambia, one of the world’s top copper producers, has been plunged into a debt crisis as the Covid-19 pandemic hurt its economy and exposed its public borrowing as unsustainable. Zambia’s bonds showed little reaction to the news. They were already showing signs of strain before the pandemic struck in 2020 but are now trading at just 40% of their face value. The government missed a $42.5m coupon payment on one of its Eurobonds that was due on October 14 but has a 30-day grace period before it goes into default. On Wednesday, the World Bank said  it has sanctioned a state Chinese state electric engineering group and its subsidiary over fraudulent practices in a power project in Zambia, setting out new conditions for them to participate in bank-financed projects.