ZAMBIA – Zambia’s US$3 billion Eurobond holders have rejected a request from the Southern Africa’s nation government to defer interest payments, risking it to become Africa’s first COVID-19 era sovereign default.

The government of Zambia had requested its Eurobond holders to grant it a deferral of interest payments until April 2021, as it struggled with the dual burdens of fighting the pandemic and a dwindling economy.

However, The Zambia External Bondholder Committee, which holds more than 40% across all Zambia’s bonds and a blocking stake in each issue, had already indicated it would reject the government’s plan, citing a lack of transparency and communication.

Zambia already missed payment of a US$42.5 million coupon on one of its dollar-denominated sovereign bonds last month, and if it does not pay its coupon, it would be classified as a default on its three outstanding Eurobonds with a face value of US$3 billion.

Zambia floated the first Eurobond in 2012 and followed up with two more in 2014 and 2015 amounting to US$3 billion.

As of December 2019, foreign debt reached US$11.2 billion with the IMF warning that the southern African nation risked plunging into debt distress.

Data from Lusaka showed that Zambia’s total external debt stock stood at US$4.8 billion, or 18% of gross domestic product, by the end of 2014.

Five years down the line, it had more than doubled to US$11.2 billion, or 48% of GDP.

The IMF predicts a rise to nearly 70% by year’s end.

The Eurobonds are not its only debt as the country owes some US$3.5 billion in bilateral debt, US$2.1 billion to multilaterals and US$2.9 billion to other commercial lenders.

The country owes about US$3 billion to China and other Chinese entities.

In October this year, Reuters reported that Zambia had missed a US$42.5 million payment that was due that month.

Kenyan Wallstreet also reported in October that Zambia was highly likely to default on its US$3 billion Eurobonds after government adjourned meetings with creditors to November 13.

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