(Lusaka) The International Monetary Fund (IMF) has provided $1.3 billion in support to Zambia as part of a deal reached among creditors to restructure the colossal debt that has sunk the country’s economy from southern Africa.
Posted at 1:08 p.m.
By the end of 2020, Zambia had become the first African country to default since the start of the coronavirus pandemic with an estimated external debt of $17.3 billion.
The release of the IMF program, signed in December 2021, was suspended on an agreement on the restructuring of this unsustainable debt.
In past negotiations, previous governments had failed to release bailouts.
The planned three-year program aims to “restore debt sustainability, create fiscal space for much-needed social spending, and strengthen economic governance,” the IMF said in a statement released late Wednesday.
“A substantial strengthening of fiscal controls is needed to support fiscal adjustment, as well as to address governance and corruption vulnerabilities,” added IMF Managing Director Kristalina Georgieva.
The country’s debt had exploded under the reign of the former Zambian president, Edgar Lungu, criticized for having contracted massive loans intended to finance a frenzy of infrastructure projects during his six years of presidency.
Since his successor, Hakainde Hichilema, came to power last year on promises to stamp out rampant corruption and resuscitate the economy, progress has been made in restoring relations with creditors.
“HH” presented a budget based on tax reforms, spending cuts and debt transparency, which was well received by investors and creditors.
“The international community has recognized the progress we have made and our commitment to reviving our economy,” posted the Head of State after the IMF announcement, welcoming a mark of “confidence”.
This program will help the country “not fall back into bad spending and debt habits” and “create a platform from which the economy can bounce back” so that growth resumes and jobs and wealth are created, added the Minister of Finance, Situmbeko Musokotwane, during a press conference.
The growth of the copper-rich country, but half of whose population lives below the poverty line “has been too weak to reduce the rates of poverty, inequality and malnutrition which are among the highest in the world”, has underlined the Fund.
The agreement concerns a loan with very favorable conditions, with a zero interest rate and repayment over 10 years, specified the representative of the IMF in Zambia, Preya Sharma.