Zambia's Debt Dispute with Afreximbank and its Impact on Sovereign Creditworthiness

The ongoing debt restructuring impasse between Zambia and the African Export-Import Bank (Afreximbank) has become a focal point for systemic risks in African sovereign debt markets. At its core, the dispute revolves around whether Afreximbank—a regional development finance institution—should be classified as a "preferred creditor," exempt from losses during restructuring. Zambia insists on equal treatment for all creditors under the G20 Common Framework, while Afreximbank resists, arguing that its multilateral status warrants special protectionsZambia Faces Arbitration by Afreximbank in Dispute Over Loan^[1]. This clash has left Zambia in default on a $45 million loan to Afreximbank and over $543 million to the Trade & Development Bank (TDB), prolonging its broader debt crisisJOIN THE PREMIER BLENDED FINANCE AFRICA 2025^[4].

Systemic Risks for Foreign Investors

The dispute underscores a critical vulnerability for foreign investors: the lack of a unified legal framework for sovereign debt restructuring in Africa. For Zambia, the inability to resolve this disagreement has delayed access to international capital and eroded investor confidence. According to a Bloomberg report, Afreximbank has threatened arbitration, further complicating Zambia's ability to secure a credible restructuring dealZambia Faces Arbitration by Afreximbank in Dispute Over Loan^[1]. Meanwhile, Fitch Ratings downgraded Afreximbank to BBB- in June 2025, citing concerns over its exposure to sovereign debt in Zambia and MalawiZambia’s Debt Deal Stalled by Dispute Over Development Bank Write-Downs^[2]. This highlights a cascading risk: if development banks face downgrades due to sovereign defaults, their capacity to fund future African projects could shrink, tightening credit availability across the continent.

The tension also reflects deeper fissures in creditor hierarchies. Western creditors and the IMF favor state-dependent repayment terms, adjusting obligations based on a borrower's capacity, while Chinese creditors and institutions like Afreximbank advocate for equal loss-sharingZambia Faces Arbitration by Afreximbank in Dispute Over Loan^[1]. This discord has led to fragmented negotiations, with private creditors sometimes securing terms that diverge from official agreements. For investors, the result is heightened uncertainty. As Zambia's Secretary to the Treasury, Felix Nkulukusa, noted, resolving the Afreximbank and TDB disputes may take until 2026, prolonging default risksZambia’s Debt Deal Stalled by Dispute Over Development Bank Write-Downs^[2].

Strategic Pivots to Regional Credit Alternatives

Amid these challenges, African nations and investors are pivoting toward regional solutions to mitigate systemic risks. A key development is the imminent launch of the African Credit Rating Agency (AfCRA) in September 2025Zambia’s Debt Deal Stalled by Dispute Over Development Bank Write-Downs^[2]. Designed to reduce reliance on Western rating agencies, AfCRA aims to incorporate region-specific data, such as local-currency debt metrics and socio-economic indicators, to provide more accurate assessments of African sovereigns. This could lower borrowing costs and enhance transparency, addressing long-standing criticisms of biased international ratingsAfrican Credit Ratings Agency Set for September Debut^[3].

Another emerging trend is the rise of blended finance and green bonds as tools to attract private capital while managing debt sustainability. At the Blended Finance Africa 2025 forum, stakeholders emphasized partnerships between public and private sectors to fund clean energy and infrastructure projectsJOIN THE PREMIER BLENDED FINANCE AFRICA 2025^[4]. South Africa, for instance, is advancing green bonds to finance renewable energy, offering a model for Zambia to diversify its economy beyond copper—a sector vulnerable to price volatilityAfrican Credit Ratings Agency Set for September Debut^[3].

Additionally, African leaders are pushing for reforms to the G20 Common Framework, including mandatory participation by private creditors and enforcement mechanisms to streamline restructuringsAfrica's Debt Dilemma: Turning Crisis into Reform^[5]. The African Union's May 2025 Debt Conference proposed legislative oversight of public borrowing and blended finance instruments to align debt with development goalsAfrica's Debt Dilemma: Turning Crisis into Reform^[5]. These initiatives signal a shift toward homegrown solutions, reducing dependence on external creditors whose priorities may conflict with African economic sovereignty.

Visualizing the Path Forward

Conclusion

Zambia's dispute with Afreximbank is more than a bilateral issue—it is a test case for Africa's evolving financial architecture. For foreign investors, the risks of fragmented creditor hierarchies and prolonged defaults are clear. Yet the continent's pivot to regional alternatives—AfCRA, blended finance, and coordinated restructuring frameworks—offers a strategic counterbalance. As Zambia navigates its crisis, the broader lesson is evident: sustainable debt management in Africa will require both systemic reform and a reimagining of regional solidarity.