Zambia’s risk of default highlights Africa’s debt crisis

Facing financial difficulties aggravated by the coronavirus pandemic, the southern African nation of Zambia appears headed for a default on debt owed to private investors.The cash-strapped country is a strong example of the debt distress for other governments in Africa even as they try to focus limited resources on urgent problems such as healthcare and education. Zambia’s looming default “definitely sends a wrong signal in the eyes of investors,” said Stephen Kaboyo, a Ugandan analyst who runs the asset management firm Alpha Capital Partners. “There’s always peer comparison,” he said. Abebe Selassie, the director in charge of Africa at the International Monetary Fund, sought to allay the concern in a news conference on Oct. 22, saying he hoped the market would differentiate Zambian assets from others in Africa. The South Africa-based research firm NKC African Economics in an assessment related to Zambia’s troubles said it saw “moderate” contagion risk in the broader region and warned that pandemic-related disruptions to global trade could raise default risk in the entire sub-Saharan African region.“These debts are highly unlikely to be part of any renewed suspension initiative, as it would be negatively reflected in sovereign credit ratings and potentially restrict market access at a crucial time,” he said.

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