2023-06-29 15:31:23
Rating agency Fitch Ratings notes in an analysis note released yesterday that it remains risky for international investors to lend money to Zambia despite the recent agreement to restructure bilateral debt. from the country. This is the other side of the coin of this type of operation which, despite appearances, tarnishes the reputation of the debtor on the market.
“Debt treatment from private creditors remains essential for Zambia to emerge from its current default situation. It is necessary that this arrangement of the debt is carried out under conditions at least as favorable as those agreed with the official creditors”, explain the analysts of the agency Fitch Ratings in a note published yesterday June 28.
Carrying out this mission seems almost impossible without making major concessions. No formal restructuring agreement has yet been signed, says Fitch Ratings, “but statements from various officials suggest that the agreement might extend debt maturities to 2043, implying an average extension of more than twelve years, rather than leading to any partial waiver of debt”.
Separately, Fitch Ratings reveals that the deal is expected to include a three-year grace period on principal repayments of nearly $6.3 billion and lower interest rates to highly preferential levels (1% up to in 2037). Rates are expected to increase to a maximum of 2.5% from 2037.
It is also likely that principal repayments will resume in 2026, and be limited to around $30 million per year, until 2035. The terms of the final agreement are already looking very complex.
Despite what appear to be sweeping concessions, the present value of future repayments is only a 40% drop from the present value of that debt, when Zambia was aiming for a target of almost 50%. It will also be necessary to clarify the question of the debt towards China.
The prospect of an agreement between Zambia and its creditors has been accompanied by a revaluation of the kwacha, the Zambian currency.
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