(Bloomberg) -- Zambia's creditors would have to take losses of about two-thirds if the country is to meet the International Monetary Fund's requirements for a debt restructuring, according to a study by groups advocating for debt forgiveness.
The southern African nation, which became the continent's first pandemic-era defaulter in 2020, has capacity to repay about between $2.8 billion and $3.5 billion of debt over the next 14 years, according to the study published on Friday by an alliance of local activist organizations and the Jubilee Debt Campaign U.K. About $7 billion would have to be written off, implying a haircut of between 64% and 71% for private and bilateral lenders, the groups said.
“Private lenders and other governments lent to Zambia at high interest rates and at high risk,” Alex Muyebe, chairman of the Zambian Civil Society Debt Alliance, said in an emailed statement. “Lenders need to accept they lent recklessly and agree a large-scale debt cancellation to allow the people of Zambia to tackle multiple external crises.”
Zambia needs to secure an IMF economic program to complete a debt restructuring under the Group of 20's Common Framework for debt treatment. The nation owes external lenders about $17 billion, including liabilities of state-owned companies, with more than one-third of that owed to Chinese entities, according to the Zambian finance ministry. Jubilee doesn't include state companies in its calculations.
“The exact details of the debt restructuring parameters will be informed by the findings of the soon to be concluded IMF/World Bank debt sustainability analysis,” Zambia's finance ministry said in emailed response to questions. “Government will only be in a position to provide granular details after finalization of the DSA.”
President Hakainde Hichilema, who won power in August, has pledged to secure an IMF program and complete a transparent and fair debt restructuring as a priority.
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