Talks With IMF To Resume Only Once Key Policy Measures Taken

The International Monetary Fund (IMF) has said that talks with the Zambian government over a possible extended credit facility will only resume once the government has taken a number of key policy measures, including steps towards greater debt sustainability. 

Responding to a press inquiry over whether a bailout package could be expected before the August general elections, IMF spokesperson Gerry Rice said talks would only resume once key policy measures were taken. 

“Public debt is unsustainable. We welcome the authorities’ commitment to finding a consensual and collaborative resolution to the debt sustainability issues Zambia is currently facing,” he said.

However, he also warned that “discussions are expected to take time, given the diverse creditor base.” This likely quashes hopes by the government to secure a bailout before Zambians head to the polls on August 12th. 

An IMF delegation held talks with the government and the Bank of Zambia in February and March this year to discuss Zambia’s request for support under the IMF’s Extended Credit Facility. While there was some broad agreement on the nature and cause of Zambia’s economic instability, the Fund said more work needed to be done in terms of fiscal policy and greater transparency surrounding Zambia’s foreign debts. This week’s statement shows that little has changed in the past four months. 

Zambia has experience a fraught relationship with the IMF throughout President Lungu’s time in office. In 2017, the president declared a state of emergency and challenged the Fund to leave if they felt he had gone ‘beyond the norms of good governance’. The IMF duly removed its representative. When the Fund returned in 2020 it reiterated its calls for greater debt sustainability but these fell on deaf ears as the government contracted a further $1.5 billion in debts to purchase Mopani Copper Mines from Glencore. 

Meanwhile, Zambia’s debt situation continues to deteriorate. In November 2020, it was the only African country to default on its debts during the pandemic era. In January 2021, the government missed a further $56.1 million coupon payment on its eurobonds as it struggles to get a handle on the situation. Foreign debts are currently in excess of $12 billion, with at least $3 billion owed to Chinese state entities, though the real figure could be much higher. Creditors say they need much greater transparency around these Chinese debts if they are able to trust the Zambian government with more of their money.