Zambia is working to rectify an $80 million payment error made to China through its state-owned power utility, Zesco Ltd. The funds, derived from electricity sales collected in a securitized account tied to a Chinese-built and financed power plant, were mistakenly transferred, according to Felix Nkulukusa, Secretary to the Treasury.

The government has since proposed treating the payment as an advance on the interest accrued on Zambia's debt to China since 2023, Bloomberg reported. This development comes as Zambia is finalizing a debt restructuring agreement with China, which is essential for resuming debt payments.

Zambia reached a memorandum of understanding with its official creditor committee, co-chaired by China and France, in October 2023 but has yet to sign a final deal with China. The country's debt restructuring efforts have been ongoing, with Zambia standing out among African borrowers due to its exceptionally high level of Chinese loan commitments relative to the size of its economy and its total outstanding debt.

In 2020, Zambia became the first African country to default on its $42.5 million bond payment during the COVID-19 pandemic, a financial setback that has hindered its economic growth and stalled new development projects. Experts warn that prolonged debt crises of this nature can push nations further into poverty and unemployment while cutting them off from the credit needed to rebuild and recover.

The $80 million payment error highlights the challenges Zambia faces in restructuring its debt. Nkulukusa acknowledged the ongoing discussions to find a resolution to the payment issue, stating, "That is the discussion we have. We're looking for a solution to that."

The incident also underscores the importance of effective debt management and the need for African countries to carefully navigate their financial relationships with international creditors. As Zambia works to rectify the payment error and finalize its debt restructuring agreement with China, the implications of this development will be closely watched by economists and policymakers across the continent.

In the broader context, Zambia's debt struggles are a symptom of a larger issue affecting many African nations. The continent's growing debt burden, largely driven by Chinese loan commitments, has sparked concerns about debt sustainability and the potential for debt crises to hinder economic development.

As Zambia seeks to resolve its payment error and finalize its debt restructuring agreement with China, the outcome will have significant implications for the country's economic future and its relationships with international creditors. The development also serves as a reminder of the need for African countries to prioritize effective debt management and sustainable financial practices to ensure long-term economic growth and stability.