Zambia and Zimbabwe are actively working towards finalizing debt restructuring deals to attract investment and stimulate economic growth. Last year, Zambia reached an agreement with a group of government lenders, including China and France, to rework $6.3 billion in loans. This week, negotiations have resumed with investors holding approximately $3 billion of Eurobonds. The successful completion of the debt restructuring deals is crucial for both countries to create 'headroom' and implement policies that can drive economic growth and development [adac6f10].
Zimbabwe's total debt stock has reached $18 billion as of December 2023, and the country seeks to improve its governance index to access concessional financing and debt restructuring. The United States has emphasized the importance of structured debt dialogues, anchored on economic and political governance reforms, in unlocking concessional funding for Zimbabwe. The US embassy in Zimbabwe clarifies that the Zimbabwe Democracy and Economic Recovery Act (Zidera) is not a sanction and outlines a roadmap for the US to support Zimbabwe's access to concessional financing and debt restructuring [921ee38d].
Zimbabwe is seeking debt relief to recover from a longstanding debt crisis. The country's external debt stands at approximately $10.5 billion. President Emmerson Mnangagwa's administration has implemented economic reforms to stabilize the economy. Finance Minister Mthuli Ncube has appealed to creditors, including China, for debt reductions. However, China is unlikely to agree to debt write-downs and prefers alternative solutions such as loan extensions. Zimbabwe is engaging with multilateral institutions like the IMF and World Bank for support. The success of Zimbabwe's economic recovery efforts depends on international response and effective policies [85899aa4].
In a recent development, Ghana has secured landmark agreements with its official creditors and a substantial portion of its Eurobond holders for debt restructuring. The agreements include an Agreement in Principle (AIP) with two significant groups of Eurobond holders, offering two main options for bondholders: a PAR option that maintains the principal amount but extends maturities and reduces interest rates, and a DISCO option that involves a 37 percent reduction in principal but offers higher interest rates. The restructuring is expected to provide Ghana with approximately US$4.7 billion in debt relief and US$4.4 billion in cash flow relief during the IMF program period. The agreements also include non-financial terms such as a most-favored creditor clause and enhanced transparency requirements for Ghana's public debt reporting. The AIP aligns with parameters of Ghana's IMF program, subject to official confirmation at the upcoming IMF Board meeting. The agreements are expected to have a significant impact on Ghana's economy and its standing in international financial markets, although investors in Ghana's Eurobonds may face losses in the short term. The agreements could also set a precedent for other countries in similar situations and help rebuild trust with international investors. Ghana will now focus on executing its economic reform program with the fiscal space created by the debt restructuring deals [40329567] [71fd232e].
In a recent statement, the head of the African Development Bank, Akinwumi Adesina, has called for quicker debt restructurings, more favorable lending terms, and $25 billion to avoid a 'lost decade' for Africa. Adesina highlighted that the continent is suffering from 'long fiscal COVID' and that the world is not doing enough to help it recover from the pandemic and global interest rate hikes. He urged the G20 Common Framework to work faster for Africa and called for a $25 billion replenishment of the African Development Fund. Adesina also stressed the need for speedier debt restructuring processes and the expansion of the Paris Club. He warned that 22 African countries are at high risk of debt distress, with debt servicing payments expected to reach $74 billion this year. Concessional financing has declined, making it difficult for Africa to achieve development at commercial rates [48f1447b].