Zambia has reached an agreement to restructure its $6.3 billion debt owed to other governments, including China. This is a significant breakthrough for countries struggling with debt, as negotiations with creditors can be lengthy. Zambia defaulted on its sovereign debt in 2020 and has since been in discussions to reach a deal. The agreement will reschedule Zambia’s debt over more than 20 years, with a three-year grace period for interest payments only. China is Zambia’s largest creditor. The debt restructuring includes arrears of $1.3 billion, and it is expected that private sector creditors will also restructure the $6.8 billion owed to them. Zambia’s debt restructuring is seen as a test case for a framework supported by the G20 to provide relief to countries facing debt crises. The process has been slow, discouraging other struggling governments from seeking assistance through the mechanism. French President Emmanuel Macron’s talks with Chinese authorities in April helped resolve the situation. The debt restructuring deal allows Zambia to receive an additional $188 million from the International Monetary Fund. U.S. Treasury Secretary Janet Yellen urged all creditors to finalize the restructuring process to provide relief to Zambian families. The restructuring agreement is seen as a step towards sustainable economic growth and poverty reduction in Zambia.
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