Zambia has launched a vote with its Eurobond holders on Tuesday, proposing to defer interest payments on its three outstanding dollar-denominated bonds until April 14, 2021.
The South African country, one of the world’s largest copper producers, has been grappling with growing public debt before a coronavirus outbreak forced lockdowns around the world and cut demand for raw materials.
“The proposal is intended as a first step to provide the issuer and its advisers the necessary breathing time to finalise the debt sustainability analysis and to define the parameters of a debt restructuring strategy aimed at putting the debt on a sustainable trajectory, which is a pre-condition to IMF lending,” said the government statement.
The country has $3 billion of Eurobonds outstanding and owes $2 billion to commercial banks, $2 billion to the International Monetary Fund and World Bank, and another $3 billion to China.
The Zambian Kwacha is the world’s worst performer this year, and foreign-exchange reserves have fallen to a record low and cover less than two months of imports. Credit ratings companies including Fitch Ratings had already warned of a high risk of default even before copper prices fell 20% this year due to the coronavirus.