Zambia’s lenders should accept large debt write-down

  • Zambia, which spends four times more on external debt payments than public healthcare, could default on 14th November
  • If paid in full, some bondholders could make 250% profit
  • Jubilee Debt Campaign argues private lenders lent at high risk and should accept a large debt write-down

Zambia will go into debt default on the 14th November if a resolution is not reached with their private creditors following a missed interest payment in October. Bondholders are due to vote on Zambia’s requested six-month extension on interest payments on 13th November. If the bondholders are paid in full, calculations by Jubilee Debt Campaign show some could make between 75% and 250% profit on what they paid for the debt.

Sarah-Jayne Clifton, Director of Jubilee Debt Campaign, said:

“Private lenders lent to Zambia at high interest rates knowing there was a significant risk the debt would become unpayable. That risk has now materialised, and bondholders must now accept a significant debt write-down. That’s the only way to return Zambia’s finances to a sustainable footing. It is simply immoral for bondholders to demand full repayment and to make huge profits on Zambia’s debt while the country struggles with Covid-19, a major economic crisis and spiralling poverty levels.”

Jubilee Debt Campaign warned back in 2015 that Zambia was at risk of a government external debt crisis, with an increasing debt payment burden and overreliance on copper exports for income from the rest of the world. This crisis has arrived in recent years.

Key facts on Zambia’s debt and economic situation:

  • According to the World Bank, of Zambia’s government external debt, 49% is owed to private lenders, 27% to China, 10% to the World Bank, 9% to other multilateral institutions and 5% to other governments.
  • Of the $1.7 billion due to be spent on external debt payments in 2020, $1.1 billion – 65% – is to private lenders.
  • The $1.7 billion Zambia is due to spend on external debt payments in 2020 is four times more than the $400 million the government spends on public healthcare.
  • Over 16 million Zambians – 88% of the population – live on less than £4.20 a day.
  • A trader who bought Zambia’s 2022 bonds in August 2018 will make around 75% profit if they receive all interest and principal payments in full. A trader who bought the same bond in March 2020 will make 200% profit. A trader buying Zambia’s 2027 bond now could make 250% profit if every interest and principal payment is made.

For further information on Zambia’s debt see Jubilee Debt Campaign’s blog: ‘Zambia edges towards debt default, but bondholders could make millions’.[1]


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