Lusaka – Zambia and the IMF are inching closer to reaching an agreement on the macroeconomic parameters for a debt sustainability programme for the Southern African country.
In a statement this week, Zambian Cabinet Secretary Mr Fredson Yamba said progress was being made in the talks.
“… the broad agreement obtained on macroeconomic parameters and fiscal targets will allow the authorities to progress in the technical preparation of debt restructuring talks in the context of the common framework as well as with the commercial creditors,” Mr Yamba said.
Recently, Finance Minister Dr Bwalya Ng’andu expressed optimism that the discussions would yield a positive outcome for a country that has been grappling to meet its international obligations to lenders.
“We are committed to securing an IMF programme which would support Zambia’s structural reform efforts to strengthen our response to the shocks caused by the COVID-19 pandemic and to ensure a solid foundation for a prompt and inclusive economic recovery,” he added.
IMF Africa director Mr Abebe Aemro Selassie was also hopeful that deal would be reached with Zambia before the country holds a general election on August 12 Presidential.
“I hope we can move forward by reaching agreements, and get broad endorsements of political leaders,” he said. “But that will depend on agreeing on the parameters of the programme, and we are not just there yet.”
Zambia owes over US$18 billion in domestic and external debts. These include US$3 billion owed through Eurobonds, a debt the country defaulted an interest payment on last year.
Most of Zambia’s lenders have insisted that the government first agree a restructuring programme with the IMF before they can consider any debt restructuring with the country.
The African Development Bank has urged Zambia not to accumulate fresh external debt and to curb public spending.
“To attain debt sustainability, Zambia must stop accumulating new external debt, increase domestic revenues, curb runaway public spending, and create a stronger institutional public financial management framework,” the AfDB notes in its latest outlook report on Zambia.
Zambia’s stock of public debt reached 104 percent of GDP in September 2020 and is projected to rise marginally in 2021, before decreasing in the medium-term because of improved co-ordination between fiscal and monetary policy, as espoused by the government’s Economic Recovery Programme.“Failure to effectively implement the Economic Recovery Programme, which is intended to resolve most of the critical economic constraints such as debt sustainability and stabilisation of the macroeconomic environment, could also pose a high risk to Zambia’s economy,” the AfDB adds.