Zambian Finance Minister Says Bondholders to Blame for Default
Zambia’s Finance Minister Bwalya Ng’andu said bondholders brought last week’s default upon themselves because they refused to sign confidentiality agreements that would have allowed him to share more information on debts from Chinese lenders.
In a near hour-long interview broadcast on state television late Sunday, Ng’andu also called on the International Monetary Fund for support as he tries to convince commercial creditors to accept an interest payment holiday while Zambia restructures as much as $12 billion in external debt.
Zambia on Friday missed a $42.5 million interest payment on one of its Eurobonds, becoming Africa’s first pandemic-era sovereign default. The default was unavoidable because the country, which had received some debt relief from Chinese lenders, had to treat all creditors equally, Ng’andu said.
Bondholders were concerned any relief they granted would be used to service debts to Chinese lenders, which account for more than a quarter of Zambia’s external liabilities. They also wanted more transparency and a credible economic recovery plan, preferably with the International Monetary Fund’s endorsement.
Some key comments from the interview:
On defaulting:
- “The information they wanted required very elaborate information relating to loans we have with other creditors. The view and position of the other creditors was, OK, you can do it but you must first have a confidentiality agreement with bondholders. As it turned out, they didn’t sign. The position of the Chinese banks is you’re not going to give anybody any information” without the confidentiality agreements in place.
- “The issue of paying bondholders alone is a fundamental issue to the other creditors. If I pay, the moment I pay, the other creditors are going to put dynamite under my legs and blow off my legs. I’m gone. I can’t walk anymore. If I don’t pay the bondholders, my legs will remain intact, but I’ll probably have a shot in the arm, and I’ll be bleeding in the arm. I can walk.”
On talks with the IMF:
- “A team is supposed to be coming next month for us to finalize agreement on exactly what specific instrument we are going to use. Is it the extended credit facility, is it a staff-monitored program? All those are the things that we need now to discuss. It’s not like there’s no engagement going on. There’s a lot of talking going on behind the scenes. The director for Africa will be coming most likely next month to continue the process.”
- “I said to them imagine being us; a man drowning in a fast-flowing river. And you, the IMF, are standing by the bank with your arms folded and I’m screaming to you, help me, I’m drowning. And then you say to me, oh, we’ll help you when you come out of the water. That’s not helpful.”
On debt transparency:
- “Right now, we have given out a lot of information. To the extent that there is not very much left to be hidden, if there was anything to be hidden. There may be challenges around the issue of trust, but the fact of the matter is that the information is available and we will give it.”
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