International Monetary Fund Managing Director, Kristalina Georgieva has urged Zambia's international bondholders to swiftly complete the restructuring of the notes after the government announced the start of the process.

The government of Africa’s first pandemic-era sovereign defaulter will meet eurobond investors on 4th June to seek approval for exchanging nearly $3.9 billion of debt for new instruments. 

This is part of wider efforts to restructure more than $13 billion of loans under the Group of 20’s Common Framework mechanism, Bloomberg reports.

Zambia is considered a test case for the plan drafted by the G20 to assist poor nations with unaffordable loans. A successful deal with bondholders would mark the first under the Common Framework, which Ghana and Ethiopia are also utilising to restructure their debt. 

It is a crucial step for Zambia to stay on track with its $1.3 billion funded program with the IMF.

“The successful implementation of this agreement will provide significant external debt service relief and further contribute to Zambia’s efforts to restore debt sustainability. Rapid completion of the debt operation with high participation would be vital for the success of the program,” Georgieva said on Tuesday.

Zambia's Dollar-denominated bonds and currency have experienced gains this week. The $1.25 billion of bonds maturing in 2027 rose by 1.2% on Monday, while the Kwacha appreciated by as much as 5% against the Dollar.

In March, a steering committee of bondholders reached an agreement with the government to restructure the debt. This agreement would entail bondholders accepting an $840 million reduction in the original amount owed, along with past due interest since Zambia's initial default in 2020.

Bondholders must approve the deal in the 4th June meetings for the exchange to proceed.

Furthermore, Zambia is also in discussions to restructure approximately $3.3 billion of commercial loans, separate from the eurobonds. Most of this debt is held by Chinese creditors, and according to Zambian Treasury Secretary Felix Nkulukusa, talks are progressing well. 

The country has already signed memoranda of understanding with its official bilateral creditors to revamp $6.3 billion of credit.