Zambia bondholders begin formal talks on $3bn debt

Zambia, a country grappling with debt distress and a looming drought crisis, has made significant strides in its debt restructuring efforts. As various African nations face an uphill battle with debt pressures, Zambia's recent developments in negotiating its debt with key lenders have brought a glimmer of hope to the nation. CNBC Africa spoke to Carol Nampurira, Corporate Sales Manager for Global Markets at Stanbic IBTC Bank, who shed light on the recent progress in Zambia's debt discussions. Nampurira highlighted the positive steps Zambia has taken in its negotiations with euro bondholders and bilateral lenders, including China and India. Overcoming the hurdle of the G20 common framework, Zambia has successfully brought China and India on board for the debt restructuring, signaling a positive turn in the country's debt situation. The involvement of key bilateral lenders has paved the way for euro bondholders to re-engage in the negotiations, leading to a rally in Zambia's bond prices. However, alongside these positive developments, Zambia faces challenges posed by a severe drought that has led to a state of disaster declaration. With 85% of Zambia's power generation reliant on hydropower, the dwindling water levels due to the drought have forced the country to explore alternative power sources. One potential solution being discussed is importing power from neighboring Mozambique, although this would require additional funding amidst the ongoing debt restructuring process. Moreover, the prolonged drought has exerted inflationary pressures on Zambia, with food prices, particularly maize, witnessing a surge. The central bank's target to reduce inflation to 6% faces hurdles due to the inflationary impact of the drought on key food commodities. As Zambia navigates through the dual challenges of debt restructuring and drought mitigation, the country's ability to secure a stable power supply and manage inflation will be critical for its economic stability. The progress in debt negotiations coupled with efforts to address the impact of the drought underscore Zambia's resilience in the face of multifaceted challenges.