Bad Hair Days

15 October 2020 By Ed Cropley Follow @edwardcropley

The African nation is careering towards default after delaying a bond payment. Western governments, Chinese state banks and private creditors owed $11 bln could have averted a crisis by burying their mutual distrust. A hasty sticking-plaster solution may set some bad precedents.

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Zambia's foreign currency bonds fell sharply on Oct. 14 as an escalating standoff between the government and its private sector creditors fed fears of a messy default.

The southern African nation’s government had been due to make a $42.5 million Eurobond coupon payment on Oct. 14. However, the previous day it repeated a request to creditors for a delay until April.

One member of the Zambia External Bondholder Committee said a delay was “very, very unlikely”.

If the government fails to make the scheduled payment, the country has a 30-day grace period until it is formally in default.

Ghanaian finance minister Ken Ofori-Atta on Oct. 13 called on private sector creditors to “come to the table” on debt relief, part of a growing, IMF-backed campaign to help impoverished countries manage the economic fallout from Covid-19.

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