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Holders of defaulted Sri Lankan

bonds watching how China will

handle Zambia’s debt treatment

CHINA CHINA’S handling of Zambia’s debt restructur- investments, grant the island.
ing could give clues to holders of defaulted Sri “With private creditors, what the IMF needs
Lankan bonds on how debt treatment for the is good faith negotiations over reprofiling debt.
South Asian debt might play out, Bloomberg That is sufficient,” said Petar Atanasov, director,
reports. co-head of sovereign research & strategy at
Beijing holds almost a third of the southern Gramercy Funds Management. “But for official
African country’s total foreign liabilities esti- creditors, the bar is higher, they need specific and
mated at $17bn. It is also co-chairing Zambia’s explicit guarantees on terms which the IMF con-
creditor committee, set up in June 2022. At their siders necessary.”
second meeting in July, the creditors agreed to Zambia, which became the continent’s first
restructure Africa’s number two copper produc- pandemic-era sovereign defaulter, needs relief
er’s debt, paving the way for the International on payments worth $8.4bn through 2025, the
Monetary Fund (IMF) board to sign off the IMF said recently. The sum is about 90% of
country’s request for a $1.3bn bailout. its scheduled external debt servicing over the
A preliminary $2.9bn IMF loan last week has period.
not resulted in Sri Lanka’s bonds rebounding, In the past, China has been slow to provide
with them having been falling since COVID-19 the guarantees, due to its concerns about being
broke out in 2020 and going into default in early underrepresented at the IMF, Atanasov told
2022. Bloomberg. “So finding common ground on
Now, investor attention turns to China, India sovereign debt restructurings where China is a
and Japan -- Sri Lanka’s biggest bilateral cred- major creditor tends to take time.”
itors. Bondholders, Bloomberg reported on Sri Lanka’s external obligations amount to
September 10, want to see how much debt relief $47bn. Like Zambia, China is her biggest credi-
those governments, which have key strategic tor holding about $8bn of the debt.™
and geopolitical interests over and above their

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