Zambia's debt-rework battle scars mar Common Framework success

Zambia's deal with bondholders this week suggests it will finally emerge from more than three years in default, and become the first successful restructuring under the debt-rework architecture designed by the G20.

The deal is a much-needed win for the so-called Common Framework. The African nation's president Hakainde Hichilema posted on X that "history has been made", while International Monetary Fund (IMF) president Kristalina Georgieva lauded the "important achievement".

Global leaders hope that Ghana may soon reach its own deal with lenders, boosting the Framework before the IMF World Bank spring meetings in Washington, D.C. in mid-April.

But the scars from Zambia's drawn-out battles with creditors - and its years-long, stop-start progress - have left investors, observers and many policymakers themselves wary of the multilateral mechanism's efficacy.

It was designed to expedite talks between a myriad of lenders from Chinese state-owned institutions to London-based asset managers and New York banks.

"I don't think anyone is filled with a tremendous sense of confidence that the Common Framework is going to speed up the debt negotiation process," said London-based Kevin Daly, head of emerging market debt at Abrdn, which held some of Zambia's US$3 billion worth of international bonds.

Zambia was the first African country to default amid the economically punishing Covid-19 pandemic, doing so in late 2020.