Zambia got an International Monetary Fund approval for a $1.3 billion, 38-month loan program on Wednesday. This is a crucial step in the southern African country’s quest to restructure its debts and reignite its economy which has been ravaged by mismanagement and COVID-19.
The IMF said in a statement that the new Extended Credit Facility arrangement would provide total funding of 978.2 million Special Drawing Rights – about $1.3 billion at current exchange rates – equivalent to 100% of Zambia’s Fund quota, or shareholding.
Approval by the IMF’s Executive Board will unlock an immediate disbursement of about $185 million, the Fund said.
China and France – Zambia’s main creditors pledged in late July to negotiate a restructuring of the country’s debts. This move was welcomed by IMF Managing Director Kristalina Georgieva who said it was “clearing the way” for the new Fund program.
“Zambia continues to face profound challenges reflected in high poverty levels and low growth,” Georgieva said on Wednesday. “The ECF-supported program aims to restore macroeconomic stability and foster higher, more resilient, and more inclusive growth.”
Georgieva said in a Twitter message the Zambia loan approval was a “major milestone” for the long-stalled G20 effort. This showed that IMF can deliver results for other debt-burdened countries.
Congratulations to 🇿🇲 President @HHichilema & his team on the $1.3 billion IMF program approved by the IMF Board today.
We’re proud to support Zambia’s homegrown reforms and actions to help build a better future for all Zambians. https://t.co/3bVrWF6v3x pic.twitter.com/bTlmJi6GG0
— Kristalina Georgieva (@KGeorgieva) August 31, 2022
The IMF programme is aimed at restoring Zambia’s macroeconomic stability via fiscal adjustment and debt restructuring besides strengthening economic governance.
According to IMF, the next step in the debt restructuring process was for Zambia’s official creditor committee to agree on specific steps on how to deliver debt relief. This may be in a form of a memorandum of understanding to be reached by the end of 2022.
