Zambia’s Debt Deal Stalled by Dispute Over Development Bank Write-downs

Lusaka remains locked in negotiations over whether the African Export-Import Bank and the Trade and Development Bank must take losses in Zambia’s debt restructuring, a matter posing a serious barrier to the country exiting default. Zambia struck a writedown agreement with its major private creditors last June after more than three years of negotiations, but failure to settle the issue with these regional lenders means the process remains incomplete.

Felix Nkulukusa, Zambia’s Secretary to the Treasury, has said the impasse over Afreximbank and TDB cannot be resolved before next year. The core disagreement centres on whether these lenders, unlike concessional institutions such as the IMF and World Bank, should be exempt from taking writedowns. Afreximbank fears loss of its preferred creditor status if required to write down debt, worried that its credit rating could be damaged and that its ability to extend low-interest financing for high-risk African projects would be reduced.

Talks with TDB have intensified over the last two months, but Afreximbank has made little movement, according to Treasury sources. Together, Afreximbank and TDB account for just under eight per cent of the debt Zambia has earmarked for restructuring. Given the financial and symbolic stakes, their role remains a critical sticking point.

Afreximbank insists on maintaining preferred creditor status, citing its multilateral founding treaty. Supporters of this view argue that this status is essential in protecting development banks and ensuring their ability to provide concessional finance, often for projects commercial lenders would avoid. Detractors, including officials in Lusaka, argue that some of Afreximbank’s loans are not truly concessional, pointing to interest rates, shareholder structures, and the nature of certain sovereign exposures. ][3])

Credit rating agencies have already reacted. Fitch Ratings downgraded Afreximbank to BBB- citing higher credit risks and weak risk-management, including concerns over its exposure to sovereign debt in Zambia, Ghana and Malawi. The rating agency noted that, under its analysis, Afreximbank’s non-performing loans exceeded what the bank’s own reporting suggested. Afreximbank pushed back, saying the downgrade misclassified its exposures and misinterpreted legal protections under its treaty.

Lusaka is also in discussions with the IMF about a possible one-year extension to its present Extended Credit Facility programme, which now runs through late January 2026, to support its efforts to stabilise public finances. The Treasury Secretary has signalled that resolving the dispute with Afreximbank and TDB is essential to restoring investor confidence and funding for major infrastructure works, including road and rail projects.