MARRAKESH, Morocco, Oct 12 (Reuters) – The International Monetary Fund on Thursday welcomed progress on a long-awaited memorandum of understanding on Zambia’s debt restructuring, raising thorny issues such as the comparability of the treatment of private and public creditors. He said there was a growing consensus on the issue.
IMF Managing Director Kristalina Georgieva told reporters that the G20 Common Framework for Debt Restructuring has been slow to bear fruit, but recent lawsuits in individual countries, including Zambia, have accelerated the timeline. He said he welcomed the move.
News of Zambia’s impending agreement with its official creditors was revealed during a panel meeting on debt at the annual meetings of the IMF and World Bank.
Speaking on the same panel as Georgieva, Zambia’s finance minister, Situmbeko Msokotwane, said it was “embarrassing that Zambia is in a debt crisis” which has forced it to cancel infrastructure projects it can no longer afford. Stated.
Georgieva also said she was more optimistic about the debt restructuring process than before the creation of the Common Framework, but said more progress was needed.
“While we should be concerned, we recognize that we are not on the verge of a debt crisis,” he said.
At a press conference on the same day, he said a complete scrapping of the Common Framework would leave the world in a “less predictable environment” and called for creative approaches, such as moves to better align debt restructuring and the climate crisis. He added that it was necessary.
A progress report on debt restructuring talks released by the IMF, the World Bank, and India, the current G20 chair, on Thursday found that “substantial progress” had been made in terms of actual debt restructurings, but that the comparability of treatment was not clear. He said there were still differences between private and public creditors. problem.
The statement said: “Assessing and enforcing comparability of treatment (CoT) between public bilateral creditors and private creditors remains a contentious issue and consensus must be reached among all stakeholders. I couldn’t do it,” he said.
The Global Sovereign Debt Roundtable will meet on Thursday, bringing together senior finance officials from the United States, China and other G20 countries, as well as Zambia and other debtor countries, private sector creditors, the IMF and the World Bank, to discuss non-governmental issues on debt issues. A public consultation was held. .
Zambia became the first African country to default during the COVID-19 pandemic in 2020, but its restructuring under the G20 Common Framework process has been plagued by delays.
The two countries agreed in June to restructure $6.3 billion in debt owed to foreign governments, including China, and creditor member nations of the Paris Club, but it took several months to finalize a formal memorandum of understanding (MoU).
Two sources familiar with the process said negotiations took time but ultimately led to major creditor China agreeing on how to enforce parity in the treatment of private and public creditors. The first detailed document agreed with the Paris Club has been obtained.
“If we can actually get a better deal with private creditors, then the deal with public creditors is off the table,” one of the people said. “This is the first time that China and the Paris Club have developed joint rules.”
Developments in the Zambia case could serve as a model for subsequent debt restructuring agreements, sources said.
Although China says the deal with Zambia is not a blueprint, the indicators for assessing comparability and how the agreement will be implemented will set a precedent, the sources said.
Reporting by Andrea Shalal, Rachel Savage and Jorgelina de Rosario.Editing: Sharon Singleton and Jonathan Oatis
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