UPDATE 1-Need to treat all creditors equally led to Zambia default, c.bank says

(Adds context, detail, new quote)

LUSAKA, Nov 18 (Reuters) – Zambia defaulted on its sovereign debt not because it could not pay a missed Eurobond coupon but due to the need to treat all creditors equally, central bank Governor Christopher Mvunga said on Wednesday.

“One of the conditions is that all creditors have to be treated equally. … It’s not that we could not pay. It’s just that if we pay one creditor then we need to pay all the creditors,” Mvunga told a news conference.

Zambia became Africa’s first sovereign pandemic-era default after it failed to pay a $42.5 million coupon at the expiry of the grace period on Friday.

“So the decision that was undertaken, which was a conscious decision, that we would not pay any of the creditors and we would treat all of them equally with a view that we could come up with a constructive, progressive, forward-looking plan on our debt sustainability which would allow us, in future, to meet all our creditor obligations,” Mvunga added.

Holders of Zambian Eurobonds on Friday rejected a government request to defer interest payments until April.

Mvunga also said on Wednesday that the central bank had left its main lending rate unchanged at 8.0% at its most recent monetary policy meeting.

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