Zambia and Saudi Arabia have signed a debt restructuring agreement to reschedule more than $130 million of Zambia’s debt to the Arab nation.
The agreement was formalised on Thursday during a ceremony in Lusaka, the Zambian capital, by Zambian Minister of Finance and National Planning, Situmbeko Musokotwane, and Chief Executive Officer of the Saudi Fund for Development, Sultan bin Abdulrahman Al-Marshad.
Al-Marshad said the agreement signifies the ongoing development partnership between the two countries.
Musokotwane said the debt restructuring agreement formalises a shared commitment to addressing the country’s debt, ensuring fiscal sustainability, and fostering economic growth.
“This bilateral agreement is a result of our constructive dialogue and collaboration, for which we deeply thank the Saudi Fund for Development and its leadership,” Musokotwane said.
In addition to the debt restructuring, the two nations also signed an agreement approving a $35 million loan to finance the construction of the King Salman Specialized Hospital in Zambia.
The agreement with Saudi Arabia follows another debt restructuring deal Zambia secured with France on 8 December.
This bilateral agreement will implement the restructuring of debt owed to France. It aims to help the southern African nation return to a sustainable debt path, in line with the objectives of the program supported by the International Monetary Fund. France has also provided Zambia with a budgetary aid of 16 million euros over two years (2023-2024) to finance emergency food programs in response to droughts caused by the El Niño phenomenon.
According to the Center for Global Development (CGD), Zambia had its public debt written off as part of the Heavily Indebted Poor Countries initiative in 2005.
Subsequently, it received significant investment, particularly from Chinese state-owned banks, in the late 2000s to boost economic development and diversify its economy. While these investments contributed to economic development, the CGD stated that they also raised debt levels and interest payments, which eventually led to a sovereign default in December 2020.
Zambia’s 2020-24 sovereign debt restructuring under the G20 Common Framework involved protracted negotiations that the CGD say kept the Zambian economy in a standstill for over 3.5 years. The CGD notes that this process highlighted the weaknesses of the Common Framework, which are now widely acknowledged by the development community.
The organisation analysis details southern African nation experience with restructuring its sovereign debt and highlights areas where reform of the Common Framework could benefit low-income countries facing debt distress in the future.
