Zambia has tough choices to make between debt and default
IMF financial assistance might be used to service Chinese debt or be spent on vote-catching pet projects
Zambia can choose its own luck this Friday 13th. It can pay euro bondholders the $42.5m interest coupon it owes, and so delay the inevitable moment that it fails to meet its financial commitments on $18bn debt, and kick the can down the road. Or it can refuse the bondholders’ conditions for more transparency on its Chinese loans in exchange for a temporary payment suspension, and head for default.
Default feels imminent, despite the finance minister’s efforts to keep the creditors on board. After years of unsustainable public borrowing and fiscal mismanagement, it is not clear whether the minister himself knows how much Zambia really owes. So much of the debt in question is wrapped up in joint ventures and pulling these project finance loans apart is a Herculean task. ..
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