Zambia & the G20 Common Framework

Eurodad #debtfacts

The news

On February 5, Zambia submitted an official request to restructure its public debt under the G20 Common Framework for Debt Treatments Beyond the DSSI. The Common Framework excludes, in principle, debt write-offs or cancellation. These can only be granted in exceptional cases. Instead, the Common Framework contemplates the reprofiling of public debts to provide support to countries at risk of debt distress. A reprofiling involves an increase in the maturity of a credit without imposing a reduction in its value.

The analysis

The pandemic exacerbated the debt crisis in Zambia and pushed the country into default in 2020. Public external debt service has increased rapidly in recent years: from 7,2 per cent of government revenues in 2015 to 51 per cent in 2021. It’s projected to increase even further, up to 67 per cent in 2022. Pending a resolution of its default, more than half of Zambia’s government income is earmarked for the country’s lenders. This figure is equivalent to five times expenditure in public health care and two times public education budget.

Only a fraction of Zambia’s debt payments is covered by the G20 Debt Service Suspension Initiative (DSSI). Only 18,6% of debt payments due between May and December 2020 were covered by DSSI. If DSSI is not extended further in 2021, only 14.38% of debt service will be covered by the G20 initiative.

A debt treatment under the G20 Common Framework will prove a difficult endeavor due to the diverse creditor base of the country. Reprofiling of public debt under the Common Framework is unlikely to restore debt sustainability. Zambia requires a debt restructuring, including debt cancellation and involving private, multilateral and bilateral creditors. However, without a debt workout mechanism, the country is trapped between the competing interests of commercial creditors and China.

Other resources

On Zambia

Afrodad and JCTR - Zambia, Debt and Covid-19

Eurodad - Webinar “Zambia: The canary in the (debt crises) mine?”

Jubilee Debt Campaign - Articles on Zambia

World Bank - G20 DSSI Annual Tables, Zambia

On debt, DSSI and Common Framework

Erlassjahr - Sovereign Debt Monitor 2020

Jubilee Debt Campaign UK - Private lenders main recipients of debt payments from crisis countries

Eurodad - Shadow report on the limitations of the G20 Debt Service Suspension Initiative

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