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Zambia Debt Relief Talks miss 5th MOU Deadline

President Hichilema meeting the Eurobond creditors in London

By Mwansa Chalwe Snr

When Zambia’s Official Creditor Committee (OCC) met in Washington on 18th April, 2023, it was reported that barriers holding talks back had been resolved. And the non-binding Memorandum of Understanding (MOU) was going to be signed in May, when the OCC was scheduled to meet again.

“Agreement was reached on nearly all issues that were holding back progress. There was progress and the next meeting is in two or three weeks’ time and MOU is expected to be signed,” Reuters reported, quoting two different sources who were privy to what transpired in the OCC meetings.

Although there was general optimism about the Official Creditors signing the MOU in May, there were those of us who understand how China operates in negotiations, who were very cautious and rather skeptical. As Patriots, we advised the Zambian government to take a risk mitigation measure. We suggested that a powerful delegation led by the Finance Minister, accompanied by the foreign Minister, go on a diplomatic mission, to lobby China before the OCC meeting in May. The physical trip by a high powered delegation to Beijing was going to be a deal clincher. The advice was ignored.

The May OCC meeting did take place, but no MOU was signed, and this is the fifth deadline that has been missed. China has clearly been sending a message to Zambia. As at present, Zambia’s Debt restructuring deal does not seem to have any end in sight. And Minister of Finance, Dr. Situmbeko Musokotwane, appears concerned after seeing the month of May pass without a deal.

Delays to the debt restructuring are having a significant impact on the economy and the livelihoods of our people. The uncertainty created by the protracted restructuring process has put pressure on our currency and made it difficult to attract the much needed foreign investment,” He said in statement addressed to Zambia’s Official Creditors Committee on 30 May, 2023.

In the past, there were various speculations as to the reasons why talks for the Zambian debt deal were stalling. However, following the speed at which Ghana has achieved financial assurances and approvals from the Official Creditors including China, it has made government critics question the Zambian government’s debt restructuring strategy. It has taken Ghana only two months, to get approvals from Official Creditors and the IMF Board after listening to advice from experts outside government and adopting their recommended strategy.

How Ghana got faster nod from Official Creditors than Zambia

Ghana secured a staff-level agreement with the International Monetary Fund (IMF) in December, 2022 for a $3 billion loan. And for the IMF’s board to sign off the programme, they required Ghana’s Official Creditors to provide financing assurances. China is Ghana’s biggest bilateral creditor, with about $1.7 billion of debt.

China had initially rejected attempts by Ghanaian officials for them to commit to the setting up of a Creditors’ Committee for an agreement on a debt package. In early February 2023, Ghanaian President Nana Addo Dankwa Akufo-Addo appealed to Germany to “encourage” China to support Ghana’s debt restructuring efforts when he met the visiting German Finance Minister, Christian Lindner.

“The President and the Finance Minister have appealed to Germany to support Ghana in convincing China to come to the table, and we are ready to do that but at the same time, I want to appeal to all Ghanaians who have strong ties to China, who are doing nice business with China to also engage them and convince them that it is time to sit down with all the creditors and agree on a package,” German Ambassador, Daniel Krull, advised Ghana. “We are prepared to live up to our responsibility as one of the major bilateral creditors to Ghana. The Big elephant in the room is China, the largest creditor to Ghana”.

On the basis of advice from Ghanians experts outside Government and the German Ambassador, on 22 March, 2023, Finance Minister Ken Ofori-Atta led a powerful delegation to Beijing. He disclosed that the Ghanian government’s top priority was to secure IMF board approval first, with the fine details of debt treatment operations to follow later. On his return, he reported that China had agreed to support Ghana and that they will cooperate in meetings with Paris Club and other bi-laterals. And one and half months later, on 12 May, 2023 – Official Creditors (Paris Club and China) gave financial assurance to IMF on behalf of China.

On 17 May, 2023 IMF Board approved Ghana’s loan and two days later on the 19 May, 2023 IMF remitted $600m to Bank of Ghana. It took Ghana less than two months to get Chinese support and IMF approval of the deal.

The reason why Ghana got the approvals fast was simple. They listened to Ghanian experts outside government and adopted a step by step strategy, and focused on lobbying the biggest creditor directly. Ghana undertook a high level physical visit to Beijing, knowing that members of the Paris Club were already in their column with the IMF having approved a staff level agreement. Ghana totally disregarded lobbying the United States government, the International Monetary Fund, World Bank, the United Nations Secretary General, and other Western countries to speak to China on their behalf after being advised by the German Ambassador.

Zambia on the other hand, despite the unsolicited advice to government to follow a similar approach as Ghana, decided to adopt a different strategy. Zambia has put undue faith in the effectiveness of the OCC by over relying on it. The country has not paid enough attention to the important arbiter for the debt deal, and one with a de facto veto – China. Zambia’s approach has showed a lack of understanding of the basics of Chinese civilization, culture and negotiations etiquette. Consequently, this has resulted in China changing goal posts and being reluctant to sign the MoU on five different expected occasions. There are five different dates on which the deal was expected to be consummated. And these are as follows: December 31, 2022; during the G20 Finance Ministers in February, 2023 in India; the end of 2023 first Quarter – 31 March, 2023; the April 2023’s IMF/World Bank Spring meetings in Washington and the latest being May, 2023 during the latest Official Creditor Committee meeting. In a normal situation, whoever has been advising Zambia on this failed Debt restructuring approach and strategy is supposed to be fired? It is proving a costly strategy.

On the February 1, 2023, I penned an article, advising government on how to speed up the debt deal. READ MORE:

Why is China not signing Zambia’s MOU?

It is no longer a secret that it is China who is delaying the deal, and there is no need to beat about the bush. The latest approval of Ghana’s deal by the Official Creditors who include China, is the clearest sign that Zambia has issues to resolve with China, before it can sign the MOU. In January,2023, both US Treasury Secretary Janet Yellen and former World Bank President, David Malpass accused China of delaying Zambia’s restructuring, and asked them to stop making unfeasible demands.

China is asking lots of questions in the Creditors’ Committees, and that causes delays, that strings out the process,” He said in an interview with Bloomberg News. “It’s important for them to be focused on getting to an actual debt restructuring where the burden can be lightened for Zambia.”

On the basis of the messages of support for Zambia’s Debt restructuring that was coming from Beijing, many Zambian analysts treated the Americans accusations of China with a pinch of salt. This is no longer the case. The Beijing messages of support have increasingly turned out to be mere rhetoric and diplomatic niceties, as actions speak louder than word.

Zambia, on the other hand, has not properly diagnosed the reasons why China is not signing the MOU. And as a result, they have been applying the wrong medicine, like the latest statement from the Finance Minister appealing to the OCC. It is this lack of proper diagnosis of why China is not signing the MOU that has resulted in the five missed deadlines, and the consequential delays in the deal. The restructuring deal has technical, diplomatic, relationships and geopolitical dimensions, which all have to be taken care of in strategy formulation and implementation. Zambia has placed too much focus on fulfilling technical issues only. This wrong diagnosis was clearly captured in Finance Minister Dr. Situmbeko Musokotwane’s answer News Diggers newspaper as to why government had missed the first quarter deadline for the deal.

We mentioned the first quarter because we are committed to delivering our part of the bargain. We did not take into account that these other people who also made commitments, they will not honour their side of commitment. And on our side as government, we have done everything that we committed ourselves with them but the delay is on their side. They are now asking questions here and there and we are pushing hard. The IMF is helping us, the World Bank is helping us, the donors are helping us,” he said.

In April, 2022, Chinese Ambassador to Zambia Du Xiaohui said that China did not want to join the G20 Creditors Committee because it believes that friendly bilateral cooperation is the best way to deal with debt between friends. It follows that China treats the OCC with some element of contempt, partly because it is a creation of the West. China is a reluctant participant of the Creditors Committee. It views the OCC as a formal administrative convenience for its borrowers to access IMF funding, among other things, but does not take it as serious negotiating forum for its debt, at least. And one will only get quicker results by direct informal engagement with China, and the OCC being there for rubber stamping.

And purely on the basis of my in depth analysis and my expertise, having written a book on the subject two years ago, and predicted what is currently playing out, there are about four possible, non-technical reasons why China is delaying signing the MOU. I am sure the government is aware of some of them. Unfortunately, some of the reasons are not for public consumption due to their sensitivity. Zambia will need to address these issues at some point. The earlier they are attended to, the better for our economy. The answer to the resolution of the debt deal at its current stage, lies more on what steps Zambia takes in engaging its biggest bilateral creditor, and not necessarily with appeals to the Official Creditor Committee, which is quite toothless without Chinese support.


The New Dawn administration must be shocked and disappointed about how the debt restructuring talks have turned out to be. They did not anticipate that the talks will take this long, resulting in the reversal of some of the macroeconomic gains they had scored. This, however, should be part of their learning curve. They should not be beating themselves up. They are a number of lessons that they can draw from this experience. The wise learn from their own mistakes and those of others.

The administration should realize that running a country involves team work. We are “Team Zambia” and we want to win. The patriots among us, want the New Dawn government, like any other government of the day, to succeed. When “Team Zambia” succeeds, credit will go to the manager, who is the President even if advice came from other people outside government. And players in a game rarely see their own mistakes. It is the outsiders who do and point them out so that corrections are made.

One of the first lessons from the stalled debt restructuring deal is the exposure of the limitations of the USA and Bretton Woods institutions like the IMF and World Bank influence in 21st Century development finance ecosystem. The West has failed to deliver debt relief to Zambia without China. There is no doubt that Zambia over relied on the West to deliver the deal, based on the country’s experience of the Highly Indebted Poor Countries (HIPC) program of the 2000s but situation has drastically changed.

Another major lesson for the New Dawn, is for them to open up to advice from different sections of society, because running a country is complex, with many uncontrollable variables and too many moving parts. There no one individual or group of individuals who can know everything, as the Senior Citizen Mr. Emmanuel Hachipuka, an experienced Chartered Accountant, correctly observed in his Op-ED to counsel President Hichilema.

It is not only HH that can decide the country’s direction alone. Whatever he does, he must remember that the country is not his alone but the majority shall decide the country’s direction. HH must learn to listen to the country. The country has a say in the way he governs his people.” He commented about the management of the economy and the country. “Public opinion matters, and so does the church and many segments of our society. He should desist from surrounding himself with “Yes bwanas”. Time is running out. The approach to debt restructuring he has used is causing severe delays. I am not sure who his consultants are on this subject.”


Mwansa Chalwe Snr is a Chartered accountant and Author. He is an independent financial commentator and analyst. He is the author of: Competition/dp/9982913174 Contact:[email protected]