Zambia and Saudi Arabia have formalised a debt restructuring agreement to reschedule more than $130m of Zambia’s debt to the Arab nation, according to DNE Africa.
The agreement was signed on Thursday in Lusaka by Zambian Minister of Finance and National Planning, Situmbeko Musokotwane, and Chief Executive Officer of the Saudi Fund for Development, Sultan bin Abdulrahman Al-Marshad.
Musokotwane said the debt restructuring agreement represents a mutual commitment to addressing the country’s debt, ensuring fiscal sustainability and fostering economic growth.
“This bilateral agreement is a result of our constructive dialogue and collaboration, for which we deeply thank the Saudi Fund for Development and its leadership,” Musokotwane said.
Al-Marshad said the agreement highlights the ongoing development partnership between the two countries.
In addition to the debt restructuring, the two nations also signed an agreement approving a $35m loan to finance the construction of the King Salman Specialised Hospital in Zambia.
This agreement with Saudi Arabia follows another debt restructuring deal Zambia secured with France on 8 December. The agreement with France aims to restructure debt owed to the European nation.
This is in line with the objectives of the program supported by the International Monetary Fund, and is intended to help the southern African nation return to a sustainable debt path. France has also provided Zambia with a budgetary aid of €16m euros over two years (2023-2024) to finance emergency food programs in response to droughts caused by the El Niño phenomenon.
Zambia had its public debt written off as part of the Heavily Indebted Poor Countries initiative in 2005, DNE Africa reported, citing the Center for Global Development (CGD).
Subsequently, the nation received significant investment, particularly from Chinese state-owned banks, in the late 2000s to boost economic development and diversify its economy. While these investments contributed to economic development, the CGD stated that they also raised debt levels and interest payments, which eventually led to a sovereign default in December 2020.
Zambia’s 2020-24 sovereign debt restructuring under the G20 Common Framework involved protracted negotiations that the CGD say kept the Zambian economy in a standstill for over 3.5 years. The CGD notes that this process highlighted weaknesses of the Common Framework, which are now widely acknowledged by the development community.
The organisation’s analysis details Zambia’s experience with restructuring its sovereign debt and highlights areas where reform of the Common Framework could benefit low-income countries facing debt distress in the future.
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