IMF approves $189m Zambia payment after debt breakthrough
The International Monetary Fund signed off on an $189 million payment to Zambia that had been held up for months as the southern African nation negotiated a debt restructuring deal with official creditors including China.
Zambia’s performance under the loan program remains strong, the IMF said in a statement on Thursday. All performance criteria for the first review of the loan and nine structural benchmarks have been met, with only slight delays in the remaining two, it said.
“The authorities have taken bold steps to restore fiscal sustainability, raise social spending, and strengthen economic governance,” the IMF said in a statement. “This ambitious reform agenda aims to reverse the impact of past economic mismanagement and shocks, such as Covid-19, and raise growth, create jobs, and reduce poverty.”
Zambia last month announced a breakthrough deal with its official creditors to rework $6.3 billion in loans. The copper-producing nation became Africa’s first pandemic-era sovereign defaulter in 2020, and has since been trying to restructure its debts.
The government still needs to sign a memorandum of understanding with its official creditors, and reach legally binding deals with each. It’s also still in talks with holders of $3 billion in eurobonds and other commercial creditors. The government must seek at least as favorable terms from them as it got from official creditors, according to the Group of 20’s Common Framework that it’s using as a template.
Governments of lower-income countries struggling to service their loans have been watching Zambia’s debt restructuring closely, as it’s seen to set a precedent for how deals under the Common Framework might look as China works with traditional creditors of the Paris Club to treat debts.
