BlackRock urged to delay repayment of crisis-torn Zambia’s debt | Zambia

BlackRock, the world’s largest money manager, has come under pressure to delay demands for interest payments on Zambia’s debt to prevent the crisis-hit African country’s finances from spiraling out of control.

Anti-poverty campaigners said BlackRock, which manages $10bn (£7.68bn) in assets, was among private sector lenders who refused to cut the interest rate or delay loans. payments on Zambian bonds, unlike the governments and international agencies that hold the country’s debts. .

Charity Jubilee Debt Campaign said it believes the asset manager, which holds $220m of Zambian sovereign bonds, mostly on behalf of clients of its index-traded funds, could turn a profit of $180 million if the debts were paid in full.

“This would represent a 110% profit on what we estimate BlackRock paid for the debt,” the charity said.

Zambia, which has cut health and social care spending by a fifth over the past two years to balance its budget, has seen debt soar in recent years to finance infrastructure projects, many for help the country to complete the hydroelectric plants affected by the drought.

Solar power projects have made the country almost self-sufficient in electricity, but the high cost of borrowing and the Covid crisis have crippled the country’s finances.

Other loans from the International Monetary Fund (IMF) have been tied to pledges to end fuel subsidies for households and businesses, pushing the inflation rate above 20% last year.

Of Zambia’s external debt, 46% is owed to private lenders, 22% to China, 8% to other governments and 18% to multilateral institutions.

China is among government lenders that have agreed to a longer debt repayment schedule that private lenders, including banks, have so far resisted, the Jubilee Debt campaign said.

The Zambian government has already defaulted on loans from commercial lenders and could default on other loans, risking becoming a pariah in international debt markets.

Since the onset of the pandemic in early 2020, the charity estimates that Zambian bonds have an average face value of 59 cents on the dollar and the average interest rate on its bonds is 8.1%. The southern African country applied for a new G20 debt relief package in early 2021 but has yet to have any debt forgiven.

Tim Jones, head of policy for the Jubilee Debt Campaign, said BlackRock bought Zambian bonds at rock bottom prices when it was clear the country was already in trouble.

He said: “It is unfair that BlackRock and other lenders are making massive profits from Zambia’s debt crisis. If BlackRock refuses to cancel Zambia’s debt, then the UK and other G20 countries should help Zambia stay in default on BlackRock.

Isaac Mwaipopo, a member of the Zambia Civil Society Debt Alliance, said: “Zambia’s debt crisis is preventing people from accessing health care, education and other social services.

“We urgently need all Zambian lenders, including BlackRock, to agree to cancel the debt so that we can recover from the Covid pandemic and the economic crisis we are facing. The loans have been granted at high interest rates and are trading at low prices, so it is only fair that lenders agree to significant debt cancellation, rather than making massive profits on the people of Zambia.

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Debt restructuring negotiations are due to take place later this month. G20 finance ministers are due to meet on April 20, during the IMF’s spring meetings, to discuss the progress of the debt relief package, known as the common framework.

Zambia, Chad and Ethiopia last year requested debt relief under the common framework, which the IMF says has yet to be agreed, in part because it requires private creditors participate “on comparable terms to overcome the challenges of collective action and ensure equitable burden-sharing”.

BlackRock was unavailable for comment.

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