LUSAKA / LONDON, Nov. 13 (Reuters) – Time is running out for Africa’s first post-COVID sovereign default, as Eurobond holders wait to see if Zambia makes an overdue payment on Friday as the government hopes that the creditors granted him a deferral payment.

Zambia must pay a $ 42.5 million coupon on one of its $ 3 billion sovereign bonds when the 30-day grace period expires at the end of the day.

The government has also scheduled meetings with creditors to see if they will grant the West African nation a payment suspension until April.

Zambia’s External Bondholders Committee – a large group of creditors holding more than 40% of all Zambia’s bonds and a blocking stake in every issue – has said it will reject the government’s plan, citing a lack of transparency and communication.

“Investors are really upset that Zambia had three years to go to the International Monetary Fund and get funds, but refused to let the fund enter the country to avoid painful reforms,” ​​said Lutz Roehmeyer, CIO at Capitulum Asset Management, which voted to support deferral of payment but is not part of the group.

The government has said it is doing everything it can to avoid a sovereign debt default, although it has also pledged to seek similar terms from all of its external creditors if debt service is suspended. .

Zambia’s finance ministry did not immediately respond to a request for comment.

If Zambia did not benefit from a deferral and pay its coupon, it would be classified as defaulting on its three outstanding Eurobonds with a face value of $ 3 billion.

Even before the coronavirus pandemic caused a global economic slowdown, Zambia was grappling with growing debt.

Data from Lusaka showed that Zambia’s total external debt stock stood at $ 4.8 billion, or 18 percent of gross domestic product, at the end of 2014. Five years later, it had more than doubled to $ 11.2 billion, or 48% of GDP. The IMF expects an increase to nearly 70% by the end of the year.

Eurobonds are not its only debt. Zambia owes some $ 3.5 billion in bilateral debt, $ 2.1 billion to multilateral agencies and $ 2.9 billion to other commercial lenders. He owes around $ 3 billion to China and Chinese entities.

The Zambian kwacha has fallen by nearly a third since the start of the year, adding to the pressure.

Zambia’s dollar bonds trade between 45 and 47 cents per dollar, according to data from Tradeweb.,,

With a number of African countries struggling with unsustainable debt, Zambia is being closely watched as a test case for how borrowers and creditors might navigate a larger debt crisis.

“African countries must reach a resolution quickly so that they can also deal with other pressing health and economic issues that COVID has exacerbated,” said Jacqueline Musiitwa, managing partner of Hoja Law Group.

“Right now, there just needs to be more transparency in general to ensure that Africa finds a solution, not only in the short term but also in the long term.” (Reporting by Karin Strohecker in London and Chris Mfula in Lusaka, additional reporting by Joe Bavier in Johannesburg; editing by Larry King)