Bloomberg Africa reports that a French official has revealed that Zambia has reached an agreement in principle to restructure $6.3 billion of debt with bilateral lenders that are expected to announce a deal, setting a precedent for countries struggling to service their liabilities.
The accord marks the first major relief won by a developing country under the Group of 20 nation’s Common Framework that brings the traditional creditor nations of the Paris Club around the same negotiating table with China and India.
Details are still unclear, beyond that the creditors led by China and France agreed to extend the maturities on their loans over some 20 years, with a three-year grace period.
The parties will sign the memorandum of understanding in the coming weeks, the official said.
This could lead the way for other nations — including Ghana, Sri Lanka and Ethiopia — locked in negotiations with creditors from China, the Paris Club and bondholders.
More than 70 low-income nations face a collective $326 billion burden, with more than half of them already in or near debt distress, according to the International Monetary Fund.
Zambia’s currency has rallied 12 percent this month in anticipation of the agreement, the biggest gain among 150 currencies tracked by Bloomberg.
Zambia’s eurobonds have delivered a performance only exceeded by El Salvador and Argentina.
A meeting to mark the agreement will be attended by French leader Emmanuel Macron, Zambian President Hakainde Hichilema and Chinese Premier Li Qiang on the sidelines of the Summit for a New Global Financing Pact in Paris, the French official said.
It’s a major step in the process of ending the default of the first African nation to do so in the pandemic era.