IMF Director To Visit Zambia As Debt Restructuring Enters Final Phase

The International Monetary Fund (IMF) Managing Director, Kristalina Georgieva will travel to Zambia later this month to progress debt restructuring talks, following an agreement between the government and the IMF for a bailout package in August 2022.  

Back in October, Georgieva hoped that by the close of 2022 the IMF would finalise a framework for debt restructuring for Zambia and Chad. These plans were part of a newly-launched initiative established by the Group of 20, a forum of 20 of the world’s largest economies tasked with maintaining economic growth across the globe.

The IMF allocated funds of $1.3 billion in August 2022, to be loaned for three years. Zambia’s Mission Chief at the IMF, Allison Holland, described this milestone positively: “Zambia’s government is taking bold and decisive actions to get its economy back on track, and the IMF stands with them […] Zambia’s government aims to cut wasteful spending or spending that doesn’t help the poor”.

The IMF-Zambia agreement was considered a “road to recovery” in the post-COVID-19 era, encouraging other nations such as Chad and Ethiopia to seek assistance. Securing a settlement with the IMF was one of the New Dawn government’s manifesto pledges, after the previous Patriotic Front administration racked up such high debts that Zambia was forced to enter into default in November 2021.

On 12th January, Georgieva confirmed that a global sovereign debt “roundtable” would be meeting in February at the G20 meeting in India. Georgieva added that she would be travelling to Zambia in two weeks to conclude a debt treatment process, which would make Zambia the second African country after Chad to relieve a portion of its debts with the IMF. Georgieva said she expected reforms to the IMF’s approach to debt reduction to encourage growth, and that Ghana was debating whether to seek relief in a similar fashion to Zambia.

Updates on the progress of these talks are expected in February, and additional meetings are planned for April at the spring meetings of the World Bank and the IMF.

A debt restructuring deal with the IMF would reduce the amount of money spent by the government on servicing its foreign debts; freeing up funds for public services such as roads, schools and hospitals. It would also improve the country’s standing with foreign lenders, opening up new lines of credit for individual infrastructure products or emergency disaster management.

Image via Reuters.