New forms of debt restructuring reward bad behaviour

Negotiations overimf international debt are often headspinning. To reduce the debts of a country that can’t pay the bills, it takes referees from the , teams of lawyers and a contest between a country and its creditors. Everyone wants a deal, but no one is keen on taking losses. Just as creditors agree on who should club together, they start arguing about the terms. The chaos can go on endlessly. Countries, unlike bankrupt companies, are never liquidated. “It was a zig-zag, sideways, forwards, backwards, down, up, but we kept our eyes on the ball,” reported Haikande Hichilema, Zambia’s president, after his country finally managed to strike a deal.On June 22nd, at a , Zambia’s rich-country creditors announced said deal: they had agreed to push back repayments on their lending by two decades to 2043. The wriggle room created by the extension, as well as accompanying interest cuts, could make Zambia’s debt burden considerably lighter—a surprise, since the biggest of the country’s creditors is China, which holds $4.2bn out of $6.3bn of its external debt to official creditors, and has spent the past few years obstructing an already chaotic process.