Zambia Restructuring Offers Clues on China’s Willingness to Ease Debts of Poor Countries

Zambia’s request to restructure some $17 billion in foreign-currency debt is the first real test of a process created by the G-20 in late 2020 aimed at getting China, which in recent years has become the biggest government lender to poor countries, to join international debt-relief efforts when these countries run into payment trouble. The so-called Common Framework for debt treatments also requires defaulting governments to negotiate debt write-downs with their private creditors—including international banks and bondholders—in line with those offered by government creditors.

Saturday’s statement by a committee representing Zambia’s bilateral creditors didn’t say by how much they would reduce the country’s roughly $4 billion in bilateral loans or how this debt relief would be structured.

But the committee said it supported Zambia’s request for a $1.4 billion bailout from the International Monetary Fund, and that requires the country’s debt, which had ballooned to 123% of gross national product by the end of 2021, to be reduced to a sustainable level. The World Bank, which was involved in the talks among creditors, said “significant debt relief” was needed to ensure the long-term sustainability of Zambia’s debt.

China’s foreign ministry and its embassy in Zambia didn’t respond to requests for comment Saturday on how much debt relief Beijing was prepared to offer Zambia. China’s government has consistently rejected accusations by the U.S. that it had pushed poor countries into a debt trap and says it works out solutions with individual governments when they struggle to repay loans.

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