Govt Applies To IMF For COVID-19 Credit Facility

The Government is seeking a COVID-19 credit facility from the International Monetary Fund (IMF).

Last month the International Monetary Fund (IMF) approved debt service relief for 25 member countries. However, Zambia was not on the list. To date the fund has approved requests for emergency aid in relation to the pandemic from 50 of its 189 members, for amounts totalling $18 billion.

The IMF recently forecast a contraction of the economy by 3.5%, citing power shortages as a significant problem in addition to the current coronavirus pandemic.

Zambia’s estimated revenue for 2020 is predicted to fall by at least 20%, or K14.8 billion, as a result of Covid-19, Finance Minister Bwalya Ngandu has said. 

Meanwhile, external debt stock continues to rise and now stands at US$11.2 billion. The debt increased by almost 10% in the six months to February 2020, having stood at US$10.2 billion in June 2019 and just US$1.9 billion in 2011. According to the Minister the latest increase comes as a result of new disbursements on existing loans mostly earmarked for infrastructure development.

“Zambia will now discuss with the fund on an appropriate macro-economic framework that will lead to a programme eventually,” the minister confirmed in April.

Relations with the IMF have proved trouble under President Lungu’s government. A bailout had been under discussion, on and off, for more than five years, with the Government rejecting an initial proposal in 2015, before returning to the negotiating table. The President then challenged the IMF to leave the country if they felt he had gone beyond the norms of good governance and democracy following the declaration of a state of emergency in 2017. The fund subsequently withdrew its representative to Zambia in August 2018. The major stumbling block to a deal appears to be concerns regarding Zambia’s debt sustainability.