The official creditor committee in Zambia is planning to sign a memorandum of understanding for the $6.3 billion debt restructuring by next week, marking the end of the International Monetary Fund’s annual meeting.

Back in June, the government reached a deal in principle with the group headed up by China and France, but since then, progress has been sluggish. 

Within the agreement, Zambia would lower interest rates to 1% and repay the loans in 2043. The deal also provided for a 40% cut in the net present value of the debt, Bloomberg reports.

After becoming the first country in Africa to default on its sovereign debt during the pandemic in 2020, Zambia has struggled to reach an agreement with creditors. 

Earlier in 2023, the IMF held back close to a $190 million payment to the country due to delays with the official creditor group coming to an agreement on debt relief, with China as Zambia’s largest bilateral creditor.

One of the key issues at next week’s International Monetary Fund meetings will be emerging market debt distress and China’s position as a major creditor. Indeed, a number of Sri Lanka’s official creditors are striving to reach a deal before the IMF meetings to restructure the country’s debt without China’s participation.

In addition, the IMF is also attempting to push a wider roundtable to determine a way to manage debt treatments between the Paris Club, China, private creditors and others, the Bloomberg report adds.

The Paris Club, which is a group of predominantly developed creditor countries – not including China – was confident last week that a deal would be reached by the IMF’s meetings, according to a source with knowledge of the matter.