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Efforts to force African development lenders to absorb losses in sovereign debt restructurings would set a dangerous precedent and risk driving up the cost of financing across the continent, the Trade and Development Bank (TDB) President and Managing Director, Admassu Tadesse, has reportedly warned.
According to Bloomberg, Zambia is preparing to impose losses on regional institutions such as TDB and the African Export-Import Bank (Afreximbank) as part of its effort to restructure $13.4 billion in external debt owed to a mix of creditors — from Chinese state-owned banks to international bondholders.
Zambian Finance and National Planning Minister, Situmbeko Musokotwane, recently reiterated that the country remained committed to honoring its debt agreement with official creditors, which includes subjecting loans from TDB and Afreximbank to comparable treatment.
Similarly, Ghana has made overtures in this direction, with its finance minister reportedly asking Afreximbank to participate in debt treatment discussions.
Read more: Zambia in debt restructuring talks with Afreximbank, TDB —Finance minister, Musokotwane
However, Afreximbank has refused, citing its “preferred creditor status”, a classification it argues exempts it from participating in restructurings.
TDB, while also claiming preferred status, has adopted a more conciliatory position, reportedly offering limited relief on Zambia’s $500 million+ debt exposure.
An official from the Alliance of African Multilateral Financial Institutions has warned that compelling regional lenders to accept haircuts would weaken their capital reserves, increase their own borrowing costs, and ultimately diminish the continent’s development finance capacity.
The ongoing standoff presents a risk to economic recovery efforts in both Zambia and Ghana, and could further complicate the G20’s Common Framework for sovereign debt restructuring — a mechanism already criticized for slow implementation and procedural bottlenecks.
The International Monetary Fund (IMF) has clarified that preferred creditor status is determined by the broader international creditor community and cannot be unilaterally declared.
Meanwhile, TDB — which reportedly holds insurance on a substantial portion of its Zambian exposure — is said to be evaluating its legal and financial options, expressing frustration at being excluded from key negotiations.
The Bank argued that this exclusion highlighted systemic flaws in the global financial architecture governing sovereign debt.
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