ZAMBIA’S DEBT RESTRUCTURING DEAL
It is very good that finally we have a debt restructuring deal.
With a debt restructuring deal in hand, now we will see things for what they are – the real economy – without hiding behind delayed debt restructuring.
But the excitement coming with this announcement may be misplaced. It’s being celebrated like Zambia is receiving $6 billion.
The details of the restructuring may not offer us paradise. And we shouldn’t confuse debt restructuring with debt write off.
If you’re drowning in a sea of debt, you need debt restructuring to get your head back above water. Under debt restructuring, creditors change the terms of your loan agreements so that you can better manage the payments. This may include a longer loan term, a lower interest rate or even a reduction in the amount owed.
In a word, debt restructuring is the process of reworking an existing debt agreement to better fit your current financial situation.
From the way we are reading it, the creditors have agreed to restructure Zambia’s debt and now the creditors and the country have to agree on the details after which agreements will be signed.
In summary, from the Ministry of Finance press release what we are picking up is the 3 year’s moratorium on principal repayment and extension of debt repayment tenure to over 20 years. There’s no mention of reduction in interest rate nor partial write off or haircut. The $6.8 billion private debt negotiations are yet to be concluded and this is the difficult part.
At this point the agreement is non binding so we maybe celebrating too soon but we hope for favourable terms.
Fred M’membe
President of the Socialist Party