Zambia and Saudi Arabia have signed a debt restructuring agreement for $130 million, aimed at addressing Zambia’s fiscal challenges. Alongside this, a $35 million loan for the King Salman Specialized Hospital was approved. These agreements reflect ongoing efforts to achieve fiscal sustainability and are in the context of previously secured deals, including one with France, indicating a strategic approach towards economic recovery amidst past debt issues.
Zambia and Saudi Arabia have officially established a debt restructuring agreement aimed at rescheduling over $130 million of Zambia’s outstanding debt to the Kingdom. The formal signing took place on Thursday in Lusaka, with Zambian Minister of Finance and National Planning, Situmbeko Musokotwane, and Sultan bin Abdulrahman Al-Marshad, Chief Executive Officer of the Saudi Fund for Development, representing their respective countries.
Minister Musokotwane articulated that this debt restructuring agreement signifies a collective promise to address Zambia’s critical debt issues while promoting fiscal sustainability and spurring economic growth. He expressed gratitude towards the Saudi Fund for Development, stating, “This bilateral agreement is a result of our constructive dialogue and collaboration…” Meanwhile, Mr. Al-Marshad emphasized that this agreement underscores the enduring development partnership between the two nations.
Alongside the debt restructuring, both countries have also finalized a $35 million loan designed to facilitate the construction of the King Salman Specialized Hospital in Zambia. This arrangement occurs shortly after Zambia’s earlier debt restructuring deal with France on December 8, which also aimed at alleviating the nation’s debt burden owed to the European nation.
This recent agreement aligns with initiatives supported by the International Monetary Fund, which seeks to guide Zambia toward a sustainable debt trajectory. France has augmented its assistance by providing Zambia with €16 million in budgetary aid over the period of 2023 to 2024, intended to support emergency food programs in response to droughts exacerbated by the El Niño phenomenon.
Historically, Zambia benefited from a debt write-off under the Heavily Indebted Poor Countries initiative in 2005, after which substantial investments, especially from Chinese state-owned banks, were made to enhance economic diversification. However, these investments escalated debt levels, ultimately culminating in Zambia’s sovereign default in December 2020. The restructuring process from 2020 to 2024, framed under the G20 Common Framework, was marked by extended negotiations that, according to the Center for Global Development (CGD), left the Zambian economy stagnant for over three and a half years. This situation has drawn attention to the limitations of the Common Framework and the need for reform to assist other low-income nations encountering similar debt crises.
Zambia, having experienced significant debt distress, previously benefited from the Heavily Indebted Poor Countries initiative, which alleviated a substantial portion of its public debt in 2005. Following this, the country attracted considerable investments from foreign entities, particularly Chinese state-owned banks, aimed at fostering economic growth. Nevertheless, the rise in debt levels and obligations led to a sovereign default in 2020. Zambia has since engaged in restructuring negotiations under the G20 Common Framework, navigating a complex landscape of international financial relations and commitments to sustainable development goals amidst fiscal challenges. This recent agreement with Saudi Arabia, along with the previous one with France, reflects ongoing efforts to stabilize the economy and initiate growth through strategic collaborations and loans.
In conclusion, Zambia’s recent debt restructuring agreement with Saudi Arabia symbolizes a pivotal commitment to managing the nation’s economic burdens while fostering growth. This partnership, along with supportive measures from France and the International Monetary Fund, is part of a broader strategy to restore Zambia to a sustainable fiscal path. The challenges encountered during the restructuring processes underscore the necessity for reform in international financial frameworks to better assist nations like Zambia, which face ongoing debt distress.
Original Source: www.dailynewsegypt.com
