Zambia, known as an “over-indebted” country by China, finally received a $1.3 billion financial loan from the International Monetary Fund, media reported.
Zambian Finance Minister Situmbeko Musokotwane was able to receive a $1.3 billion loan from the IMF with a five-and-a-half-year grace period and a final ten-year maturity, the Financial Post reported.
This comes at a time when China is already responsible for nearly 30% of Zambia’s debt to non-Chinese private creditors.
Calling it an attractive offer, the Financial Post said the IMF deal means a lot for other low- and middle-income countries trapped in China’s debt diplomacy.
Looking closely at the agreement with the IMF, it is understood that Zambia would prioritize recurrent spending over investments in public infrastructure, which are traditionally funded by Chinese stakeholders, the Financial Post reported.
Zambia specifically said it would completely cancel 12 planned projects, half of which were to be financed by China EXIM Bank, as well as one by ICBC for a university and another by Jiangxi Corporation for a dual highway from the capital.
In addition, the government canceled 20 of the outstanding loan amounts, some of which were for new projects and some for ongoing projects. Such cancellations are not unusual for Zambia, but the majority of these loans come from Chinese partners.
Ten of the canceled loans are from China EXIM Bank; Along with three other Chinese loans from ICBC ($303 million) and one from Jiangxi Bank ($157 million), these loans will save Zambia $1.1 billion over the next few years. The other six undistributed loan amounts, totaling $483 million, came primarily from commercial lenders.
While some of these cancellations may have been initiated by Chinese lenders themselves, particularly those in arrears, Zambia appears to have escaped the clutches of the Chinese. Dealing with the devil can never be beneficial in the long run.
China is playing a trick when it comes to lending to African nations because what Beijing is really after is resources. In these loans, repayment is not made in cash but in terms of first access to China for its rare earth metals.
The other thing to understand about the Zambia-IMF deal is that China is likely to take a back seat as a development partner, which is related to the first, because
The IMF deal allows for the continuation of 62 concessional loan projects from 12 different lenders, the majority of which are managed by international institutions and once again include current spending as opposed to infrastructure-focused initiatives.
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