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China, Bondholders, and the Worsening African Debt Crisis

The debt crisis in Zambia got a lot worse this week after bondholders refused the government’s request for a 6-month repayment delay. Those private creditors said they’re frustrated by the government’s lack of transparency about the total amount of debt and how much is truly owed to China.

In Angola, investors are equally worried about the government’s ability to service its debts given, $20.5 billion to China, given that the state-owned oil company Sonangol revealed that last year it generated no profits since all of the money went to pay for debt servicing costs. If Sonangol can’t earn enough money to repay the country’s loans, then it’s effectively impossible for the country to get out of the financial hole it’s in.

Analysts predict that Zambia and Angola are just the first of a number of African countries that are facing either an outright default or an extended period of uncertainty that risks crippling their economies. Mark Bohlund is closely following the unfolding debt crisis as a senior credit research analyst for REDD Intelligence, a risk assessment service for asset managers. He joins Eric & Cobus from London to talk about the pivotal role that private creditors, specifically bondholders, now occupy in this increasingly grave situation.

Show Notes:

About Mark Bohlund:

Mark Bohlund an economist and sovereign/country risk professional with more than a decade in experience covering frontier and emerging market economies. Prior to joining REDD Intelligence, Mark was a Middle East and Africa analyst at Bloomberg, and prior to that, he served as a senior economist at IHS Global Insight. His expertise is in market risk for hard-currency and local-currency debt across a number of frontier and emerging markets.

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