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First, Zambia Defaulted on Part of Its Debt, Then Came the Credit Downgrade, Now the Question is What Will China Do?

Zambia's President Edgar Lungu shakes hands with China's President Xi Jinping before their bilateral meeting at the Great Hall of the People on September 1, 2018. Nicolas ASFOURI / POOL / AFP

Zambia’s financial situation is rapidly deteriorating following last week’s announcement by the government that it would default on $3 billion of Eurobond debt. Soon after, the credit ratings agency Fitch downgraded Zambia’s foreign-currency bonds, immediately increasing the cost of borrowing for Lusaka.

Investors weren’t encouraged by Friday’s unveiling of the 2021 annual budget by Finance Minister Bwalya Ng’andu where he forecast yet another increase in the country’s budget deficit but didn’t elaborate debt restructuring plans.

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