BlackRock calls for postponement of debt repayment from crisis – torn Zambia Zambia

BlackRock, the world’s largest fund manager, has come under pressure to postpone demands for interest payments on Zambia’s debt to prevent the crisis-hit African country from spiraling out of control.

Anti-poverty activists said BlackRock, which manages assets worth $ 10 billion (£ 7.68 million) is among private sector lenders that have refused to cut interest rates or delay payments on Zambian bonds, unlike governments and international agencies that hold the country’s debt.

Jubilee Debt Campaign says it believes the asset manager, who holds $ 220 million in Zambian government bonds, could generate $ 180 million for clients, mostly in his index-traded funds, if the debts are paid off. completely.

“That would be a 110% profit on what we think BlackRock has paid for the debt,” the charity said.

Zambia, which has cut health and social care spending by a fifth in the past two years to balance its budget, has increased its debt in recent years to finance infrastructure projects, many of which will help the country replenish drought-stricken hydropower plants. .

Solar projects have made the country almost self-sufficient in electricity, but the high cost of loans and the Covid crisis have crippled the country’s finances.

Additional loans from the International Monetary Fund (IMF) have been linked to commitments to end fuel subsidies for households and businesses, pushing inflation above 20% last year.

Of Zambia’s foreign debt, 46% is due to private creditors, 22% to China, 8% to other governments and 18% to multilateral institutions.

China is among government creditors who have agreed on a longer debt repayment schedule that private creditors, including banks, have so far opposed, according to the Jubilee Debt campaign.

The Zambian government has already missed loans from commercial lenders and may default on additional loans, risking becoming a pariah on international debt markets.

Since the beginning of the pandemic in early 2020, the charity estimates that Zambia’s bonds had an average nominal value of 59 cents per dollar, and the average interest rate on its bonds was 8.1%. South Africa is applying for a new G20 debt relief scheme in early 2021, but no debt has yet been canceled.

Tim Jones, head of Jubilee Debt Campaign’s policy, said BlackRock had bought Zambian bonds at the lowest prices when it was clear the country was already in trouble.

He said: “It is unfair for BlackRock and other creditors to make huge profits from the debt crisis in Zambia. If BlackRock refuses to cancel Zambia’s debt, then the United Kingdom and other G20 countries must support Zambia’s default on BlackRock.

Isaac Mwaipopo, a member of the Zambia Civil Society Debt Alliance, said: “The debt crisis in Zambia is preventing people from gaining access to health care, education and other social services.

“We urgently need all creditors in Zambia, including BlackRock, to agree to cancel the debt so that we can recover from the Covid pandemic and the economic crisis we are facing. Loans are given at high interest rates and traded at low prices, so only fair creditors agree to significant debt cancellations instead of making massive profits from the people of Zambia.

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Debt restructuring talks are due later this month. The G20 finance ministers are due to meet on April 20, during the IMF’s spring meetings, to discuss the progress of the debt relief scheme known as the common framework.

Zambia, Chad and Ethiopia applied last year for debt relief under a common framework not yet agreed, according to the IMF, in part because it requires private creditors to participate “under comparable conditions to meet the challenges of collective action and ensure fair sharing. of gravity. “

A BlackRock spokesman challenged the charity’s estimates of potential profits, saying there had been no significant increase in the company’s holdings in Zambian debt since September 2020, “except as necessary to ensure that funds remain close to or close to.” indicator level “.

They added: “The money invested in bonds from management assets is mainly the money of ordinary people who save for retirement. None of the money belongs to the asset manager. Therefore, any decision to restructure these bonds must be balanced by the obligation of the asset manager to protect the savings of millions of people whose money has been allocated to these countries, while acknowledging the difficult circumstances they face due to the challenges posed by Covid-19.

The spokesman said that the company “has no discretion” to sell bonds held in index funds, “so it is in the interest of our customers for these countries to prosper and succeed.”

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