India and China signed Zambia's debt restructuring agreement

Hakainde Hichilema, The president of Zambia, a bankrupt country in southern Africa, said that China and India had signed deals to restructure their debt holdings.

This news raised optimism that the long-delayed process to pull out of a protracted default was now underway.

To settle a "terrible debt mountain" of more than $13 billion in external debt that Africa's second-largest copper producer stopped paying in 2020, Hakainde Hichilema announced that Zambia intended to reopen negotiations with private creditors.

Last year, Zambia agreed to change the conditions of a $6.3 billion loan it owes to state lenders. However, Beijing's signing of an agreement suddenly became even more critical because progress was ruined when China, the single largest creditor, objected to a deal with private investors involving nearly $4 billion in US currency bond claims.

At Zambia's annual N'cwala harvest festival in the east of the nation, Hichilema told traditional chiefs, "I'm very pleased to indicate that the last two countries that had not signed [deals as] official creditors, China and India, have signed."

"We are making progress — working consistently, unquestionably, we are making progress — and we are now focusing on the private creditors, whom we hope to be able to settle shortly," he continued.

In order to maintain a $1.3 billion IMF bailout and restart economic growth, Zambia must reach agreements with its creditors. President Hichilema aims to increase international investment to resuscitate the nation's copper mines.

Zambia's restructuring delays have come to represent the G20's inability to effectively include China in discussions to prevent debt crises from worsening for the world's poorest countries.

Over the past ten years, Beijing has been the world's largest lender to developing nations. However, it has stayed outside the Western-dominated Paris Club of creditor nations.

Tension between creditors on the equitable distribution of losses on defaulted debts has caused the "Common Framework," intended to encompass China and India, to become stuck.

China rejected Zambia's bondholder agreement last year because it did not adhere to its interpretation of "comparability of treatment," a notoriously elusive but essential principle in sovereign debt restructuring that guarantees equal treatment for official and private creditors.

Finance Minister Situmbeko Musokotwane told Zambia's parliament this week that "this concept [of comparability of treatment] was not properly clarified, leading to ambiguous understanding by different creditors." "Agreement regarding the private creditors should also be made easier by the progress made in clarifying the term."

The central bank of Zambia has been fighting against the kwacha's depreciation against the dollar and a resurgence of inflation, even while the country defaults.

This week, Musokotwane issued a warning, stating that the country's current growing and harvest season is also experiencing "one of the worst droughts in living memory," necessitating further financial assistance from the government for households.