Three years after defaulting on its foreign debt, Zambia is still trying to reach agreement with all its creditors on how to manage this situation. This has left the southern African country in a state of development finance limbo. It is handicapped in raising the funds needed to generate jobs, build infrastructure, provide health, education and social services and deal with climate change. Its president, Hakainde Hichilema, has warned that the situation threatens to undermine its democracy.

Zambia’s inability to reach a definitive agreement with all its creditors is not for lack of trying. But it has had bad luck. It is the test case for the Common Framework that the G20 international forum established in November 2020 to deal with the debts of low-income countries. The framework was expected to result in all creditors making comparable contributions to help a defaulting country resolve its debt crisis.

Zambia’s experience demonstrates that the Common Framework has failed to deliver.

The International Monetary Fund, the global economic governance institution responsible for assisting countries in economic trouble, lacks the resources and the bargaining power needed to push other creditors to reach a sustainable debt deal with Zambia. It could only contribute US$1.3 billion over three years to Zambia’s financing gap of US$8.4 billion. Furthermore, the conditions it has attached to its financing impose tough choices on the Zambian government and require sacrifices from the Zambian people.

Zambia’s official creditors have been organised into a committee chaired by China and France. The official creditors moved slowly and appear to have been more focused on reaching agreements that serve their geo-strategic interests than on what is best for Zambia. In June 2023, they finally agreed on a common template for all official creditors. Each individual creditor is now expected, based on this template, to reach its own binding agreement with Zambia. These individual agreements are still a work in progress.