We are grateful for the support from our official creditors in resolving Zambia’s debt issue, says Dr Situmbeko Musokotwane
June 23, 20230
AFTER months of talks with stakeholders, Zambia has finally sealed the deal for debt restructure.
The agreement is expected to pave the way for the approval by the International Monetary Fund (IMF) Executive Board of the first review of the Fund- supported program in the coming weeks, allowing for the next tranche of MF financing of about US$188 million to be disbursed.
The agreement marks a crucial milestone in Zambia’s ongoing efforts to strengthen its economy and improve the quality of life for its citizens.
According to a statement by the Ministry of Finance, sealing of the deal entails that the country achieves debt sustainability in all cases.
“The Government of the Republic of Zambia is pleased to announce that it has reached an agreement on a comprehensive debt treatment with its Official Creditors under the G20 Common Framework. This landmark achievement is a significant step towards restoring Zambia’s long-term debt sustainability,” said the Ministry of Finance.
They said that the deal complements the strong commitments from Zambia’s Multilateral Development Partners to support the country’s economic recovery through substantial concessional financing.
The Ministry of Finance noted that the country commends the support and cooperation of its Official Creditors in reaching this agreement, which demonstrates a mutual commitment to restoring debt sustainability in line with the IMF program targets.
“The Government is confident that this debt treatment, which entails significant maturity extensions and reduction in interest rates, will allow for the allocation of additional financial resources towards critical public investments, particularly in areas such as healthcare, education, and infrastructure development,” the ministry said.
They explained that under the agreed terms, the Official Creditors will provide a debt treatment contingent on Zambia’s debt-carrying capacity at the end of the Fund-supported program.
It was further explained that this will be assessed under the IMF and World Bank Debt Sustainability Framework for Low Income Countries and will take account of the country’s economic performance and progress in strengthening economic policymaking.
The Ministry clarified that the agreed debt treatment will be adjusted if conditions improve enough to justify on upgrade from “weak” to “medium” debt carrying capacity, in which case principal reimbursements would be accelerated and interest payments increased.
“The agreement is expected to pave the way for the approval by the IMF Executive Board of the first review of the Fund- supported program in the coming weeks, allowing for the next tranche of MF financing of about US$188 million to be disbursed. This disbursement will further bolster Zambia’s economic recovery and reform agenda,” the Ministry stated.
Further, the Minister of Finance and National Planning Dr Situmbeko Musokotwane in his statement said the deal is a big day for the country.
“We are grateful for the support from our official creditors in resolving Zambia’s debt overhang that has been choking our economy. We will now work to achieve a swift resolution with our private creditors and deliver opportunity and y to the Zambian people,” he said.