One of the world's largest copper producers, Zambia had been wrestling with growing public debt before a coronavirus outbreak forced lockdowns around the world and cut demand for raw materials.
"The proposal is intended as a first step to provide the issuer and its advisers the necessary breathing time to finalise the debt sustainability analysis and to define the parameters of a debt restructuring strategy aimed at putting the debt on a sustainable trajectory, which is a pre-condition to IMF lending," the Lusaka government said in a statement.
Zambia has $3 billion of Eurobonds outstanding and owes $2 billion to commercial banks, $2 billion to the International Monetary Fund and World Bank, and another $3 billion to China.
Finance Ministry permanent secretary Mukuli Chikuba said Zambia has been in contact with all commercial creditors in a bid to reach consensus on how to address the debt as an ongoing process.
"We are just trying to be transparent. It is not a default. In fact, two days ago we had interest payments due on the $750 million eurobond and we paid," Chikuba told Reuters.
Zambia's economy has been adversely affected by the COVID-19 pandemic, leading to debt servicing difficulties, Chikuba said.
The government statement said Zambia had engaged with the IMF in recent months and was working in "close coordination" with the fund to establish strategies required to return its debt to a sustainable path.
The country's dollar bonds suffered sharp declines on Tuesday, with the 2022, 2024 and 2027 issues,, all down nearly 3 cents in the dollar to trade around 53 cents in the dollar.
(Reporting by Karin Strohecker and Chris Mfula; Editing by Marc Jones and Mark Heinrich)
