ZAMBIA’S Eurobond holders have rejected government’s request for modifications and waivers and the deferment of interest payments due on each bond between October 14, 2020, to April 14, 2021, triggering and confirming a sovereign debt default.
Announcing the development in a statement, Friday, Finance Minister Dr Bwalya Ng’andu disclosed that the decision to reject the Zambian government’s debt interest repayment six-month freeze was reached after a meeting held today.
“The Government of the Republic of Zambia wishes to announce that the Extraordinary Resolutions set out in the notices of the adjourned meeting of Zambia’s Eurobond holders dated 20th October, 2020, which was subsequently held today, 13th November, 2020, were not passed. Accordingly, the modifications and waivers, including the deferral of interest payments due on each of the bonds during the period from 14th October, 2020, until 14th April, 2021, requested by Zambia will not be implemented,” Dr Ng’andu said in the statement.
He, however, insisted that agreeing to consensual standstills or accruing arrears were Zambia’s only options available as a plan was being designed.
“Further, we are confident that as government continues to share information with all creditors, including the committee’s advisors, there will be an appreciation that agreeing to consensual standstills or accruing arrears are the only options available to the country, while we design a plan to put our debt on a sustainable trajectory,” Dr Ng’andu added.
He also observed that despite the bondholders’ rejection, government remained committed to ensuring that a consensual and collaborative resolution to Zambia’s debt crisis was found.
“While government regrets that the bondholders did not approve the requests made by Zambia in good faith, we remain committed to finding a consensual and collaborative resolution to debt sustainability issues. In light of the fiscal and economic challenges the country faces, Zambia will continue to engage in constructive dialogue and share information with the ad hoc committee of bondholders and all other creditors in order to agree a resolution that would gather support from all its creditors. The country also remains resolute to adhere to the principle of transparency in its engagements with the creditors,” said Dr Ng’andu.
The bondholders’ rejection follows the Zambian government’s request for a suspension of debt interest payments on all three of Zambia’s Eurobonds for a period of six months, effective October 14, 2020, in response to the challenging fiscal situation.
However, following a meeting to vote on this request by bondholders’ to grant the request to freeze interest payments for at least six months, Zambia has officially defaulted on its sovereign debt after the country missed a coupon payment of more than US $40 million, which fell due last month, whose 30-day grace period lapsed, Friday.
This means that Zambia has made history by becoming Africa’s first country to default on sovereign debt since the Coronavirus pandemic outbreak, with severe consequences possibly leading to sovereign asset seizures by some of the country’s creditors.