In 2020, as the Covid-19 pandemic swept through Africa, Zambia became the first country on the continent to default on its external debt – estimated at $17.3 billion.
Last December, the copper-rich nation reached an agreement in principle with IMF officials to provide $1.3 billion in support, but only if it takes credible steps to reduce its debt burden to levels considered manageable.
Zambian Finance Minister Situmbeko Musokotwane called the signing of the IMF deal on Thursday a “joyful moment” and said a year ago “everyone realized that Zambia was bankrupt because of an unsustainable debt”.
“Now…you can see the confidence is coming back,” Musokotwane told a news conference in Lusaka.
In a statement late Wednesday, the IMF said the facility will help Lusaka’s domestic reform plan to “restore debt sustainability, create fiscal space for much-needed social spending and strengthen economic governance.”
The fund said Hakainde Hichilema‘s new government, which came to power a year ago, is grappling with years of economic mismanagement.
“A significant strengthening of fiscal controls is needed to support fiscal adjustment and address governance and corruption vulnerabilities,” IMF Managing Director Kristalina Georgieva said.
- “Over-indebtedness” –
The IMF said Zambia’s economic growth “has been too weak to reduce rates of poverty, inequality and malnutrition, which are among the highest in the world”.
“Zambia is mired in a debt crisis and needs a thorough and comprehensive debt treatment to put public debt back on a sustainable path.”
Minister Musokotwane said his government had agreed on several policies, including better control of government borrowing, more transparency and monetary policy to anchor price stability.
These would help the country ‘not fall back into the bad old ways of spending and borrowing’ and ‘provide a platform from which the economy can recover’ for growth to resume and create jobs and wealth, he said.
He said the IMF program would allow Zambia to sit down with creditors and discuss debt servicing and restructuring measures.
Since last year’s elections, the Hichilema government has made progress in restoring relations with donors.
The IMF announcement “is a vote of confidence in your government and in the people of Zambia,” Hichilema said in a Facebook post.
“The international community has recognized the progress we have made and our commitment to revitalizing our economy and becoming a responsible member of the family of nations,” he said.
IMF representative for Zambia, Preya Sharma, said the deal was a deeply discounted interest-free loan, adding that the amount was to be repaid within 10 years.
- Editor/ additional report by AFP