By Amb. Emmanuel Mwamba
Zambia’s Foreign Debt is not China’s Burden Alone!
I have seen a statement attached here from the USA Government, welcoming China’s announcement that it is committed to resolve Zambia’s debt.
The USA urges China to follow through its commitment and bemoans that the longer restructuring negotiations drag out, the more the Zambian people will feel investor hesistancy!
The USA has called for speedy restructuring of the debt.
China is Zambia’s single largest creditor.
As China commits to resolving Zambia’s debt situation, it has also requested multilateral financial institutions ( IMF, World Bank, European Investments Bank, AfDB etc) and other creditors to cancel or forgive Zambia’s debt.
For the burden cannot be on China to cancel or forgive Zambia’s debt alone, but the debt treatment must be equal across all creditors.
BACKGROUND
As a result of the pandemic, global debt levels have surged.
In 2020, total global debt reached 263 percent of GDP, its highest level in half a century.
The build-up has been broad based, with rapid growth in both government and private debt; advanced-economy and emerging market and developing economies (EMDEs) debt; and external and domestic debt.
The G20 announced the Debt Service Suspension Initiative (DSSI).
The DSSI offered debt payment suspension on official sector debts for the poorest countries to create fiscal space to increase social, health or economic spending in response to the crisis but did not reduce debt stocks or require private sector participation.
Zambia was the first country in 2020 to apply and suspend its debt service under this initiative-scandalised as a default!
There are now 48 countries that have suspended their foreign debt service ( defaulted) under this initiative.
In November 2020, the G20 announced the
“G20 Common Framework” which would provide a forum for DSSI-eligible countries to seek debt relief if their debt is considered unsustainable by the IMF and the World Bank.
The Framework primarily envisions debt relief in the form of maturity extensions and interest rate reductions rather than face value reductions.
It reserves the option to cancel or write off debts, however, for the “most difficult cases”, determined by the WBG-IMF Debt Sustainability Analysis and the participating official creditors’ collective assessment.
The Framework is now being operationalized and refined, in part in the context of three countries—Chad, Ethiopia, and Zambia—that have sought debt relief under the Framework.
The Common Framework is the latest example of an umbrella initiative to resolve debt distress.
The Framework includes both Paris Club
members and non-Paris Club G20 members,
including China. Consistent with previous debt relief initiatives, the Framework requires debtor countries to seek comparable debt relief from their other official bilateral creditors and from private creditors on at least as favorable terms as from their official sector creditors.
At present, however, the framework does not have a clear methodology to assess comparability of treatment. It also currently lacks a mechanism to incentivize private sector participation.
Credit and reference from;RESOLVING HIGH DEBT AFTER THE PANDEMIC- Lessons from Past Episodes of Debt Relief
