Zambia is seeking up to $8.4bn (£7.3bn) in debt relief from major lenders, including private equity managed by the world’s biggest investment manager BlackRock, to help fix its public finances. Ahead of tense negotiations involving the governments of China, France and Britain, charity Debt Justice said only a major debt write-off could save Zambia’s economy from total collapse. Led by Columbia University economist Jeffrey Sachs and Jayati Ghosh, the chairman of the Center for Economic Studies at Jawaharlal Nehru University, the global group of more than 100 economists and experts said in a letter to the creditors’ negotiating committee that Zambia debt interest payments must be waived until 2023. Earlier this month, the International Monetary Fund (IMF) approved a $1.3 billion loan to the country, which defaulted on $17.3 billion in external debt after its public finances collapsed during the pandemic. Funds managed by BlackRock are among the largest private holders of Zambian bonds, with $220 million. Some are worth almost half the value they were sold for. The $1bn Eurobond due 2024 has plunged 6.3% in the past week to less than 56% of its face value. Debt Justice, formerly known as the Jubilee Debt Campaign, has estimated that BlackRock could make a 110% profit for itself and its Zambian clients if the debt interest payments are paid in full. The country has three major private sector bonds that pay an average of 8.1% in interest. The letter said: “Due to high interest rates and the fact that Zambian bonds have been trading at a much lower par since 2018, many bondholders stand to make huge profits at the expense of both Zambian citizens and creditor countries if they are paid at their face value. “It is imperative that BlackRock and other bondholders agree to fully participate in a large-scale debt restructuring, including significant cuts, in order to make Zambia’s debt sustainable.” Tim Jones, the charity’s head of policy, said the IMF loan had given the country some breathing room, but the $8.4 billion in interest payments due over the next two years should be “cancelled outright, not carried forward into the decade 2030 to trigger another debt crisis in the next decade.” Chad and Ethiopia applied last year for debt relief under the G20 joint framework, but Jones said negotiations have yet to get off the ground. Sri Lanka and Bangladesh have also requested bailouts under IMF programs to support countries devastated by the climate crisis. Zambia, which has cut health and social care spending by a fifth over the past two years to balance its budget, has seen its debts soar in recent years to finance infrastructure projects, many to help the country to supplement hydroelectric plants affected by drought. Solar projects have made the country nearly self-sufficient in electricity, but high borrowing costs, local corruption and the coronavirus crisis have crippled the country’s finances. Further loans from the IMF have been linked to pledges to end fuel subsidies to households and businesses, pushing inflation above 20% last year before easing to 9.8% in August. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. Of Zambia’s external debt, 46% is owed to private lenders, 22% to China, 8% to other governments and 18% to multilateral organizations. China is among the government’s lenders to agree a longer repayment schedule on debt that private lenders, including banks, have so far resisted, Debt Justice said. A BlackRock spokesman said it wanted “a sustainable long-term outcome for Zambia” but disputed the charity’s claim that it would benefit from restructuring debt interest payments, saying it was likely to make a loss when the bonds matured. He said: “We see it as our obligation to play our part responsibly, along with all other creditors, in ensuring that there is a path to a sustainable outcome for distressed sovereign debt issuers. “As an asset manager, we are loyal to our clients, people from all walks of life. The money we invest on their behalf is not ours and we are obligated to act in the best financial interest of our clients at all times.” Jones said BlackRock had likely bought Zambian bonds at low prices when it was clear the country was already in trouble. The Zambian Civil Society Debt Alliance, Global Justice Now, Action for Southern Africa (ACTSA), Christian Aid, Cafod and Jubilee Scotland are also campaigning for BlackRock and other private lenders to cancel the debt.
