Zambia has successfully reached a historic deal aimed at tackling its debt crisis, offering a glimmer of hope to the country's President, Hakainde Hichilema.
In 2020, Zambia became the first African nation to default on its debt payments during the Covid pandemic, largely due to loans and high interest rates that hindered the government's ability to invest in critical social programmes and infrastructure development, both crucial for economic growth.
After prolonged discussions, Zambia has now agreed on new repayment terms with its state creditors on a debt of up to 6.3 billion dollars, including over $4bn owed to China. The deal will grant Zambia an extended repayment time of over 20 years, including a three-year grace period with interest-only payments. French President Emmanuel Macron, who played a key role in persuading China to agree, hailed the agreement as a "historic" step that could pave the way for other debt-ridden countries to follow suit.
Although a bailout agreement was already reached with the International Monetary Fund (IMF), Zambia needed to restructure its debt to unlock much-needed funds. This debt restructuring process is a critical step toward regaining financial stability, fostering sustainable growth, and safeguarding the well-being of its citizens.
However, the hard work is not over yet, as over $6bn owed to private lenders still needs to be tackled.
President Hichilema, who was elected in 2021, recognises this and has made it a priority to tackle the country's financial woes, inherited from his two predecessors, Michael Sata and Edgar Lungu, who had allowed Zambia to take on significant loans to finance infrastructure projects. Though some of that money was invested, it is thought that a lot was lost to corruption.
The deal provides Zambia with a much-needed reprieve and an opportunity to revive its economy. It is hoped that this agreement will mark the beginning of a brighter future for the country and its people, according to observers.