Kwacha Grows At Highest Rate In Seven Years As Debt Restructuring Approaches

Zambia’s currency grew by 12% yesterday, the highest rate of growth in seven years, due to widespread confidence that the nation is on the edge of being offered a deal to restructure its debt by its official creditors.

The Kwacha rose to as high as 17.425 per dollar, exceeding its 200-day moving average. As a result, its dollar bond, due July 2027, surpassing other emerging-market currencies.

An anonymous member of the Paris Club informed reporters that significant progress had been made towards a debt restructuring arrangement among official investors who met at the Club, and that creditors were likely to reveal the restructuring deal at the Paris summit for the New Global Financing Pact, which will be held on 22-23 June.

The deal will establish the terms necessary for the International Monetary Fund to release $188 million to Zambia. Talks began in 2020 to restructure levels of debt that were impeding financial growth.

The G20’s Common Framework is to be applied to Zambia’s debt deal, and will test if the framework is able to resolve low-income nations’ debts. The restructuring will also demonstrate whether the G20 is able to achieve debt relief packages with China in tandem with organisations such as the Paris Club.