An orderly debt restructuring process for Zambia will be hard to achieve without an IMF programme, Finance Minister Situmbeko Musokotwane said on Friday, as he confirmed China and bondholders would join negotiations.
Musokotwane told journalists he expected an International Monetary Fund programme to be concluded by the end of June, and the World Bank has also committed to providing financial resources to the country once the IMF deal is agreed.
In 2020, Zambia became the first country to default in the pandemic era, struggling with a debt burden of almost $32 billion, around 120% of its gross domestic product.
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The country’s creditors must now sit down together to agree on the debt relief they will offer, Musokotwane said.
“China finally agreed to come on board, to be part of the Common Framework. The other category of creditors, namely the bond holders have also expressed readiness to engage,” Musokotwane said.
The Group of 20 leading economies set up a new debt negotiation process, the Common Framework, in 2020 in response to the coronavirus pandemic, to bring in creditor countries, including China, and the Paris Club forum of major lender nations.
Zambia needs to reach an agreement on making its debt sustainable with official creditors through this process in order to unlock IMF funding.
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Zambia is expecting a total of $564 million from the World Bank, of which $275 million in budget support will only be released when the IMF board approves Zambia’s programme, Secretary to the Treasury Felix Nkulukusa told reporters.
Nkulukusa said Zambia expected further $654 million from the World Bank under another three-year programme starting in July this year.
Musokotwane had said Zambia’s debt restructuring process was “stalled” at IMF meetings last month, after the country secured a staff-level agreement on a $1.4 billion three-year credit facility with the fund in December.
China, which holds $5.78 billion of Zambia’s debt, then offered to co-chair Zambia’s creditor committee at the meetings. South Africa and France have also offered to co-chair, South Africa’s finance ministry said.
