By Amb. Emmanuel Mwamba
Zambia informs London Stock Exchange, Debt Reschedule with bondholders cannot be implemented
The Government of the Republic of Zambia announces that a restructuring agreement with its Eurobond holders cannot be implemented at this time
The Government of the Republic of Zambia (the “Government”) announces today that, following the agreement in principle (“AIP”) reached with the Steering Committee of the Ad Hoc Group of Bondholders (the “S teering Committee”) on 26h October, the authorities and their advisors conducted consultations with the country’s Official Creditor Committee (the “OcC) and the staff of the International Monetary Fund (the “IMF Staff).
The 0CC, through its Co-chairs, concluded that Comparability of Treatment would not be achieved in the Base Case scenario, although would be achieved in the Upside Case scenario.
The OCC stated that the AIP, despite similar present value concessions to the deal agreed between the Government and the OCC, was not in compliance with the Comparability of Treatment in the Base Case scenario due to a shorter extension of the duration and lower contribution to the closing of the balance of payment financing gap during the IMF program period. The fact that bondholders have agreed to nominal face value concessions (“haircut”), while the OCC members have not, is not considered a mitigating factor since the haircut is not part of the criteria listed in the G-20 Common Framework to assess Comparability of Treatment.
In addition, the IMF Staff assessment showed that the AIP with bondholders would breach the DSA targets.
The debt service-to-revenues ratio would reach 16.7 percent in 2025, 2.7 percentage points higher than the 14 percent target, while the present value of the debt stock-to-exports ratio would be marginally breached (by 1 percentage point), at 85 percent in 2027.
In light of these reservations, the Government and the Steering Committee continued their engagement over the past week and discussed possible amendments to the AIP.
During these discussions, the Steering Committee made a revised proposal attached hereto as Annex A (the “Revised Proposal”), which the Government has duly consid er ed.
The Government views the Revised Proposal as compatible with the objective of restoring debt sustainability and with the principle of Comparability of Treatment.
In parallel, the authorities and their advisors also engaged with the IMF Staff and the 0CC Secretariat.
The IMF Staff advised the Government that the Revised Proposal, if implemented, would be compatible with the IMF program parameters and debt sustainab ility targets.After being notified of the outcome of the consultations with the OCC, the Steering Committee confirmed that any additional concession on their part was not possible. In the Steering Committee’s view, the Revised Proposal met the IMF program parameters and the debt sustainability targets and met the Comparability of Treatment criteria as it already delivered a present value effort higher than the OCC by 2 percentage points in the Base Case and 6 percentage points in the Upside Case.1
Notwithstanding a comprehensive agreement on the Revised Proposal between the Government and the Steering Committee, as well as an agreement with the IMF Staff in relation to the program parameters and debt sustainability targets, the Government currently does not have the support of the OCC and is unable to move forward at this time with the implementation of the restructuring with the Bondhold ers.
The Government regrets that discussions with bondholders have not yet yielded an agreement that could be supported by all of its stalkeholders.
The Government is committed to continuing its efforts to find a satisfactory solution that avoids further costly delays in completing the country’s debt restructuring.
In this context, the Government intends to continue discussions in good faith with all relevant parties on how it can reach a successful and comprehensive debt restructuring.
This announcement is made by the Government of the Republic of Zambia and constitutes a public disclosure ofinside information under Regulation (EU) 596/2014 (16 April 2014).
ANNEX A: REVISED PROPOSAL