WASHINGTON (Reuters) – Official creditors of Zambia, Chad and Ethiopia are set to meet in July, according to International Monetary Fund (IMF) chief Kristalina Georgieva, in a bid to promote efforts to overhaul their debt burdens.
The three African nations have all signed up for debt treatment under the G20 Common Framework – an initiative launched in 2020 and designed to streamline debt restructuring efforts in the wake of poorer countries buckling under the fallout from the COVID-19 pandemic.
However, progress so far has been glacial, and IMF and World Bank officials have been blunt about the failings of the Common Framework. They are pushing for finance officials of the G20 major economies to apply more pressure on China and private sector creditors to participate.
“We expect in July to have some creditor committees for all three countries meeting, but time is not our friend,” Georgieva told Reuters in an interview. “Now is the time to show results.”
All three countries face different challenges.
In January 2021, Chad became the first country to request a restructuring of its $3 billion external debt under the Common Framework.
It struck a deal with creditor nations in June 2021, but has struggled to finalise talks with private creditors. Chad owes one third of its external debt burden to commercial creditors, and almost all of that to Glencore in oil-for-cash deals dating back to 2013 and 2014.
“The oil price going up gave reasons for Glencore and others to challenge the debt sustainability analysis, they say ‘Oh well, it is not so bad anymore’,” said Georgieva, adding that the situation still “requires a debt restructuring and we are pressing for that.”
Georgieva was more upbeat on Zambia, where China had agreed to co-chair official creditor committee, but added “we have to move fast.”
Zambia’s Finance Minister Situmbeko Musokotwane said last week the country’s economy would be highly compromised without external support.
A Paris Club source said the group of wealthy creditor nations was working on providing financing assurances to the IMF that could unlock funds for Zambia.
“We hope that that can be done before the end of July,” the source added.
Ethiopia’s creditor nations held a meeting chaired by China and France in September 2021 but further progress has been held up by the country’s civil war.
The IMF said in June it wanted to start talks with Ethiopia over a funding program as soon as conditions allowed.
Georgieva said there had been close engagement with the senior leadership in China – the largest bilateral creditor to the world – on debt issues.
“We are seeing some signs that China recognizes it is actually in their own interest to prevent that crisis because they will be the first to lose dramatically if that is the case,” she said.
Beijing had now designated officials to deal with debt issues in key bodies such as the ministry of finance and the central bank, she added.
“The critical sign of seriousness is complete Zambia, complete Chad, complete Ethiopia – it is the very old saying: the proof of the pudding is in the eating.”
(Reporting by Andrea Shalal in Washington, additional reporting by Leigh Thomas in Paris, writing by Karin Strohecker; Editing by Hugh Lawson)
