Zambia is now on default crisis on its dollar-denominated bonds.

Zambia, one of the African nation which has GDP (2019) of 23.06 billion U.S. dollar, is likely to announce its default on the onset of pandemic crisis. The country has delayed to pay its interest on dollar-bond and it may be the first example to prepare for default. 

According to reports, Zambia has requested a six-month suspension of interest payments from US$3 billion dollar creditors, but has been denied. Ahead of next week's meeting, these creditors have already expressed their position not to accept Zambia's request. 

Zambia's Finance Minister said, "If the agreement with creditors fails, interest payments will not be possible with Zambia's limited fiscal capacity, and interest delinquency will not be avoided,". It implies the possibility of default.

Zambia is the world's second-largest copper producer, and has attempted to adjust its external debt to a total of 12 billion dollars amid the economic shock from Covid 19. Copper is an indispensable raw material for the industry, and prices fluctuate significantly responding to the downturn of global economy.

The interest due is on the 21st is about 42.5 million dollars. Generally, if interest is not paid after 30 days, it is classified as a default bond. It is reported that creditors' reluctance to postpone the deadline is due to concerns that they may be burdened unfairly. 

Some of the creditors on the Chinese side have pressed Zambia to ask for interest in China in order to agree on a delay, and Zambia is said to be refusing it. About one-third of Zambia's $12 billion in foreign debt comes from China.

Bondholders want Zambia to enter the IMF's bailout and economic improvement programs. However, Zambia's debt is so high that it is far beyond its eligibility for relief. Since the general election is about 10 months ahead, the possibility of massive fiscal cut is uncertain.  

Source: Global Monitor

https://now.globalmonitor.co.kr/view.php?ud=2020101522480969391a6a872ef5_41