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Zambia takes progressive steps to meet long-term financial needs

In 2021, Zambia’s per capita income declined to US$1,040 and the country was re-classified as low-income for the first time since 2011. (Image source: Adobe Stock)

A statement by the Creditor Committee for Zambia has been welcomed by the IMF and the World Bank as an important step towards reducing Zambia’s debt

The Creditor Committee met virtually last month in the presence of the IMF and World Bank staff to examine the macroeconomic and financial situation of Zambia, including its long-term debt sustainability and its formal request for a debt treatment. 

The Creditor Committee stated it supports Zambia’s envisaged IMF upper credit tranche (UCT) programme and its adoption by the IMF executive board and encouraged multilateral development banks to maximise support for Zambia. 

Commenting on the statement, World Bank Group president David Malpass said, “I very much welcome the announcement as an important step toward reducing Zambia’s debt. Significant debt relief is needed to secure long-term debt sustainability and attract the investment necessary for growth and poverty reduction. I urge official bilateral and private sector creditors to participate on comparable terms, granting Zambia a substantial net-present-value reduction in debt.”

Through 2032, the World Bank plans to support Zambia with new financing of over US$2bn in the form of concessional loans. This includes financing for investment projects in agriculture, education, energy, health, and social safety nets as well as policy-based lending in support of the structural reforms that the Government of Zambia is implementing. 

Also providing her thoughts, Kristalina Georgieva, managing director of the IMF, remarked, “I am very pleased to welcome the statement. The support from the Official Creditor Committee for Zambia’s envisaged IMF-supported programme, together with its commitment to negotiate debt restructuring terms, accordingly, provides the IMF with official financing assurances. I strongly endorse the call by the Official Creditor Committee for private creditors and other official bilateral creditors to commit to comparable debt treatments.”

Georgieva noted that the announcement will help unlock the US$1.3bn of the staff-level agreement between the Zambian authorities and the IMF team in December 2021. This agreement is an extended credit facility for 2022-2025 to help restore macroeconomic stability and provide the foundation for an inclusive economic recovery. 

“The delivery of these financing assurances will enable the IMF executive board to consider approval of a fund-supported programme for Zambia and unlock much needed financing from Zambia’s development partners,” Georgieva commented. 

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