Zambia’s Default Shows New Approach Needed For Chinese Debt

ZAMBIA’s debt default shows that Western lenders need to develop new ways of factoring existing Chinese loans into their decisions.

The Zambia Bondholder Committee said on November 16 that the country’s decision not to pay a coupon on the outstanding US dollar bonds by November 13 is “unnecessary” and “risks establishing a more adversarial backdrop to future discussions with bondholders.”

The committee, whose members hold more than 40% of the total amount of Zambia’s outstanding Eurobonds, says have been no direct discussions between bondholders and the authorities to date. There is therefore “no basis to conclude that the authorities intend to treat bondholders on an equitable basis”.

Zambia’s failure to convince bondholders “hinged on the government’s refusal to report transparently on its obligations to different creditors,” says Nick Branson, director at Gondwana Risk in London. The country “now finds itself in the invidious position of having to comply with even more