split priorites

Zambia: Xi, Hichilema speak amid allegations China’s “Rookie Status” is slowing debt restructuring

By Eric Olander

Posted on June 6, 2022 08:57

Zambia’s wealthy president, Hakainde Hichilema. (Facebook, all rights reserved)
Zambia’s wealthy president, Hakainde Hichilema. (Facebook, all rights reserved)

Zambian President Hakainde Hichilema raised the sensitive issue of his country’s burgeoning debt crisis during a phone call last week with Chinese President Xi Jinping.

President Hichilema, according to a statement on his official Facebook page, said he discussed the importance of the two countries fostering better ties overall and specifically mentioned how to “resolve the debt issue.”

Notably, though, the Chinese read-out of the call by Xinhua made no mention of President Hichilema’s debt reference.

But the call and President Hichilema’s nudge on the debt issue happened on the same day Reuters published a damning report that asserted “China’s lack of experience with tricky debt restructurings and slow coordination among its public lenders is holding up debt relief for Zambia.”

Earlier, there was widespread optimism that Zambia’s long-stalled debt restructuring process would finally get going after the IMF agreed to an extended credit facility in December and China was selected in April to co-chair a new creditor committee with France.

But whatever momentum there was back in April is now gone. The creditor committee is yet to meet, which according to Reuters correspondents Rachel Savage and Leigh Thomas, is due to “China’s rookie status on debt relief.”

Savage and Thomas said they quoted three separate sources, presumably all U.S. and European, who all blamed China for why it’s taking so long. “There is a learning curve for China and that is something we need to recognize,” said a French official, who declined to be named due to the sensitivities of the issue.

Why China is Holding Up the Zambian Debt Restructuring Process:

  • MULTIPLE CREDITORS: Unlike other African countries where China’s two policy banks are the primary creditors, that’s not the case in Zambia. Instead, according to research by the China-Africa Research Initiative, there is a coalition of at least 18 creditors that includes SOEs, commercial banks, policy banks, and private enterprises. Getting them to all align is probably very difficult.
  • PRECEDENT FEARS: Chinese debt negotiators in Zambia are fully aware that whatever happens there will be closely watched in other countries with large Chinese loan portfolios. The Chinese have long been concerned about setting precedents in one country that could be called on to apply to other states.

Reuters quoted one source who alleged that China has been reluctant to take part in the G20’s debt process which is a longstanding U.S. critique but also not entirely accurate. China has, in fact, rescheduled more debt ($2.5 billion) within the DSSI than any other stakeholder including the Paris Club ($2.1 billion).

The point of contention, though, is that they have not worked in coordination with their fellow G20 members and instead negotiated DSSI restructuring settlements bilaterally.

Published in partnership with The China Africa Project

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