Debt Deal Possible But Needs Political Endorsement – IMF

The International Monetary Fund (IMF) has said it is still possible for Zambia to secure a debt restructuring deal before elections in August, but has warned that such an outcome would need strong political will.

Talks for a deal, which began last year, are now continuing and are expected to conclude in the next few weeks, according to the Fund’s Africa Director Abebe Aemro Selassie. 

“I hope we can move forward by reaching agreements, and get broad endorsement of political leaders,” he said.  

“But that will depend on agreeing on the paramenters of the program, and we are not just there yet”. 

The timeframe for agreeing a deal is extraordinarily tight, with parliament due to dissolve on May 14 in advance of elections on August 12.

Zambia’s commercial creditors, including those holding the nation’s $3 billion worth of Eurobonds, are keen for the government to reach a deal with the IMF to serve as a basis for their own restructuring talks. 

However, many experts believe it will only be possible for Zambia to secure a deal after the elections, as President Lungu is unlikely to agree to stringent spending curbs while he is on the campaign trail. 

In September 2020, Zambia’s foreign debts totalled $18.5 billion – more than 100% of the country’s GDP. The amount owed by the country has nearly quadrupled since the Patriotic Front took power in 2011.

In November of last year Zambia became the first African country of the pandemic-era to default on its debts, missing a $42.5 million payment on its Eurobonds. This, coupled with an unknown amount owed to the Chinese state, has made creditors uneasy about the likelihood of Zambia being able to repay its obligations without systematic change.