Navigating Debt: Zambia’s Journey through Restructuring and International Support

Written by Mariana Hinojosa Castillo | March 4 2024

Hakainde Hichilema at his presidential inauguration

Back in June 2023, headlines such as “It’s finally done,” and “Bailout” signaled the hope and relief that was spreading in Zambia. After two years of negotiations, foreign lenders under the G20 Common Framework agreed to a restructuring deal. The deal would cover one-third of Zambia’s debt (around $6.3bn) and open the door for a $1.3bn three-year aid plan from the International Monetary Fund (IMF). However, the effort was delayed until 2024 due to tensions between the creditors, mainly on how losses on defaulted debts should be shared. Nevertheless, on February 24, 2024, President Hakainde Hichilema informed that China and India, the remaining countries, had signed agreements to act as official creditors.  

The 2020s marked the beginning of Africa’s new debt crisis, particularly in Sub-Saharan countries. After a decade of Chinese and Western-fueled lending agreements, Zambia became the first country to default on its $18.6bn debt in November 2020. Although this financial crisis screams déjà-vu of the 1980s debt crisis that left Zambia to endure a “structural adjustment” of its economy under the IMF and the World Bank, the current situation displays different characteristics. For starters, the creditors are no longer Washington-dominated, as China has become a predominant source of bilateral and private capital. Additionally, the terms of lending and the national economic circumstances have changed. Breaking away from the Paris Accords’ conditionalities linked to the spread of democratic values, Chinese lending has been focused on a mutual benefit prioritizing benefits for Chinese businesses.  

Although Africa’s new wave of debt crisis began in the context of COVID-19, the global pandemic only contributed to deepening the financial situation. In Zambia’s case, the changing price and demand of copper, the Zambian kwacha losing a third of its value, and the lack of sustainable economic growth from modernization projects were preceding factors that eventually left the country unable to meet the demands of its multiple creditors. According to the Finance Ministry, the country’s total debt at the end of 2022 amounted to $32.8bn. 

China and India’s agreements allow Zambia to resume progress on its restructuring journey. However, the country’s complex renegotiation process illustrates what other African countries may face. Furthermore, Zambia’s experience highlights the limitations of the G20 Common Framework to facilitate negotiations to avoid debt crises dragging on for the world’s poorest nations.