Zambia hires Lazard to advise on $ 11 billion debt burden
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The government of Zambian President Edgar Lungu has hired Lazard to advise it on restructuring the cash-strapped southern African country’s $ 11 billion external debt, which has threatened to become the country’s first sovereign default. Africa during the coronavirus pandemic.
The investment bank was hired on a $ 5 million contract to advise on the “liability management” of the country’s debt after a bidding process, the Zambian finance ministry said on Wednesday.
Lazard, who is also advising the Argentine government on its current debt restructuring negotiations with creditors, declined to comment.
Africa’s second-largest copper exporter seeks voluntary relief from private creditors to avoid default as its debts have become increasingly precarious, and as a condition for accessing IMF loans to respond to the pandemic. More than 1,000 cases have been confirmed in the country to date.
Zambia’s U.S. dollar bond prices collapsed this year as a sharp drop in copper prices and a decline in the country’s currency against the U.S. dollar put pressure on the ability to pay off debts deemed untenable even before the health crisis. Zambia’s economy, once one of Africa’s most dynamic, is expected to contract in 2020 for the first time in years.
After Argentina defaulted on its debt This month, Zambia is seen as the next big test of whether over-indebted countries can strike deals with their creditors amid the market turmoil associated with the pandemic.
Analysts and investors say Zambia’s debts will be particularly difficult to restructure because it has about as many US dollar obligations as it has debts to China, around $ 3 billion each. These debts lie outside the Paris Club of bilateral government creditors who traditionally coordinate aid to the poorest countries.
Mr. Lungu’s government, seen as increasingly erratic and authoritarian at home and abroad, is also under fire from opposition for debt transparency that has funded major procurement projects, including airports, roads and defense. The government denies the irregularity.
Zambia faces $ 1.5 billion in debt repayment this year, more than its official international reserves in January. Fitch Ratings downgraded Zambia’s credit rating to double C in April and said the default was “likely”.
Mr. Lungu’s government “does not intend to unilaterally restructure the debt without consulting creditors,” the finance ministry said.
“We will abide by the agreements and diligently use market-based instruments in our debt management,” he added.