US Treasury secretary Janet Yellen called on China to agree to a rapid restructuring of loans to Zambia, saying Beijing was a “barrier” to ending the debt crisis in the southern African nation.
Yellen, speaking in the Zambian capital Lusaka on Monday as part of her 10-day tour of Africa, said she hoped for progress from China on a deal that had “taken far too long already to resolve”.
Africa’s second-largest copper producer defaulted on $17bn of debt in 2020. The attempts to restructure the debts will define how China, the biggest creditor to the developing world, responds to a wave of defaults.
Zambian president Hakainde Hichilema’s government owes more than a third of the debt to Chinese creditors, but has heard little back from Beijing on specific terms for reducing the loans, despite an agreement in principle last year to provide relief alongside other lenders.
“I know the Chinese have been a barrier to concluding the negotiations,” Yellen said, adding that she had “specifically raised the issue of Zambia and asked for [Chinese] co-operation in trying to reach a speedy resolution” when she met Liu He, Xi Jinping’s main economic tsar, last week. “Our talks were constructive,” she said.
The former Federal Reserve chair has already visited Senegal and will next travel to South Africa, as the US seeks to rebuild economic and trade ties in the region in the wake of the inflationary fallout from Russia’s war in Ukraine and debt crises linked to Beijing’s lending.
Without a restructuring Zambia in particular cannot access a $1.3bn bailout from the IMF needed to reboot its economy. Kristalina Georgieva, the fund’s managing director, was also in Lusaka, where she is pushing for a meeting of major creditors, including China, to tackle the slow progress in resolving defaults across the developing world.
Zambia’s economy remains weakened by the 2020 default’s long legacy, providing a warning for countries such as Sri Lanka and Ghana that can no longer afford to pay back debts and owe a significant chunk of their borrowings to China.
Zambia’s president said on Monday that he was hoping for a debt deal by the end of the first quarter of this year.
Yellen’s visit is the first of several African tours by US officials this year that will highlight painful economic fallout from a surge in infrastructure lending that Beijing extended to the continent in the last decade.
Analysts have said that Zambia’s restructuring has been held back by a lack of experience and co-ordination among the several Chinese state and development banks that lent to projects such as hydropower dams, highways and airports that then soured.
A restructuring that will enable Zambia to emerge from default is a “top priority” for the US and “we will continue to press for all official bilateral and private sector creditors to meaningfully participate in debt relief for Zambia, especially China”, Yellen said.
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