Test Case Zambia Exposes China's Rookie Status on Debt Relief

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China's lack of experience with tricky debt restructurings and slow coordination among its public lenders is holding up debt relief for Zambia, a test case for the top emerging market creditor, Reuters reported. Zambia became in 2020 the first country to default in the COVID-19 pandemic era, struggling under a debt burden worth 120% of GDP. Its external debt topped $17 billion at the end of 2021, of which a third was owed to China, according to Zambian government data. China agreed last month to co-chair Zambia's official creditor committee with France, a move welcomed by Zambia's government, which has made tackling the country's debts a priority since taking power last year. Emerging market investors and other debtor countries are closely watching Zambia's case for signs of how lenient Beijing will be in the future with overextended borrowers. China became over the last decade the dominant public lender to African countries, extending $160 billion in credit since 2000, according to Boston University researchers. "There is a learning curve for China and that is something we need to recognise," said a French official, who declined to be named due to the sensitivities of the issue. The official also cited "delays in the internal processes of China", adding, "we also need to have better coordination among China itself, because there are a lot of agencies that have been lending". With the creditor committee still to have its first meeting, G7 finance ministers called on China to "contribute constructively" to the debt relief process after a meeting in Germany this month. China's foreign ministry said in a statement emailed to Reuters that the country attached "great importance to Zambian concerns about debt and supports multilateral efforts to resolve its debt problem". Read more.