Janet Yellen says China is a “barrier” to ending Zambian debt crisis

US Treasury Secretary Janet Yellen has called on China to agree to a speedy loan restructuring for Zambia, saying Beijing is a “barrier” to ending the debt crisis in the South African country.

Yellen, speaking in Zambian capital Lusaka on Monday as part of her 10-day African tour, said she hoped for progress from China on a deal that “has taken a very long time already to be resolved.”

Africa’s second-largest copper producer defaulted on $17 billion in debt in 2020. Attempts at debt restructuring will determine how China, the developing world’s largest creditor, responds to a wave of defaults.

Zambian President Hakinde Hichilema’s government owes more than a third of the debt to Chinese creditors, but has heard little from Beijing on specific terms for loan reductions, despite agreeing in principle last year to provide relief alongside other lenders.

“I know the Chinese were a barrier to concluding the negotiations,” Yellen said, adding that she “specifically raised the issue of Zambia and asked [Chinese] Cooperate in trying to reach a quick solution” when she met Liu He, Xi Jinping’s chief economic czar, last week. “Our talks were constructive,” she said.

The former Fed chair has already visited Senegal and will next travel to South Africa, where the United States is seeking to rebuild economic and trade relations in the region in the wake of the inflationary fallout from Russia’s war in Ukraine and debt crises linked to lending to Beijing.

Without restructuring, Zambia in particular cannot access the $1.3 billion bailout from the International Monetary Fund needed to reinvigorate its economy. Kristalina Georgieva, managing director of the fund, was also in Lusaka, pressing for a meeting of major creditors, including China, to address slow progress in resolving defaults across the developing world.

Zambia’s economy remains vulnerable to a long legacy of 2020 defaults, providing a warning to countries like Sri Lanka and Ghana that are no longer insolvent and owe a large portion of their loans to China.

Zambia’s president said on Monday that he hopes to close 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 the painful economic fallout from the surge in infrastructure lending that Beijing has made to the continent in the past decade.

Analysts said Zambia’s restructuring has been hampered by a lack of experience and coordination among the many Chinese state and development banks that have lent projects such as hydroelectric dams, highways and airports that then soured.

Yellen said that restructuring that will enable Zambia to emerge from default is a “high priority” for the United States and “we will continue to press for all official, bilateral and private creditors to participate meaningfully in Zambia’s debt relief, especially China.”

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