The Government of Zambia has suspended payment of debt to coupon holders for the next six months
due to the devastating impact of the novel coronavirus on its economy.
A statement issued and signed by the Secretary to the Treasury Fredson Yamba said this will affect coupon holders whose note will mature in October, January and March.
“The Ministry of Finance of the Republic of Zambia has announced a consent solicitation to holders of its (i) U.S.$750,000,000 5.375 per cent.” It said.
“Notes due 2022, (ii) U.S.$1,000,000,000 8.500 per cent. Notes due 2024 and (iii) U.S.$1,250,000,000 8.970 per cent. Notes due 2027 (the “Notes”) to request the suspension of debt service payments for a period of six months from 14 October 2020, effectively covering the upcoming three coupon payments due on 14 October 2020, 30 January 2021, and 20 March 2021 on the respective Notes.”
Impact of Covid
The statement further said Zambia is confronted with a very challenging macroeconomic and fiscal situation which has been worsened by the Covid-19 crisis.
This has severely affected the country’s public finances.
“ A combination of declining revenues and increased unbudgeted costs caused by the Covid-19 pandemic have resulted in a material impact on the Government’s available resources to make timely payments on its indebtedness leading to increasing debt servicing difficulties” the statement from the ministry said.
“This is the reason why the Republic of Zambia has taken the decision to apply for the G20 Debt Service Suspension Initiative in August 2020 and is requesting similar debt service suspension from its commercial creditors, including its noteholders”
Request for relief
Currently, the government of Zambia is engaging the International Monetary Fund, IMF to secure financial assistance within a programme of reforms that would help in stabilising the macroeconomic outlook of the country.
“ In this context, the Government is committed to finding a consensual and collaborative resolution to the debt sustainability issues it is currently facing.”
Zambia’s finance ministry has therefore invited all holders of direct and guaranteed external commercial obligations including the notes, to an Investor virtual presentation on 29 September.
