The International Monetary Fund (IMF) approved a $187 million loan disbursement to Zambia on Wednesday, offering a vital lifeline while the country grapples with stalled debt restructuring efforts. This marks the third payout under a $1.3 billion Extended Credit Facility arrangement established in August 2022.
Zambia, once Africa’s second-largest copper producer, defaulted on its debts in 2020 during the pandemic, and progress on restructuring those debts has been slow and rocky. A major setback came in November when official creditors rejected a preliminary deal, citing concerns about fairness and “comparability of treatment” for various lenders.
IMF mission chief for Zambia, Mercedes Vera Martin, acknowledged the ongoing deliberations within Zambia’s Official Creditor Committee (OCC) to define those “comparability” requirements. She confirmed Zambian authorities are revising their Eurobond restructuring proposal accordingly.
“While significant progress has been achieved, some adjustments still need to be made,” the IMF said in a statement, emphasizing the need to meet both program parameters and the OCC’s comparability demands.
The protracted negotiations have taken a toll on Zambia’s fragile economy. The kwacha currency has slumped against the dollar, and inflation has surged in recent months. The government, however, views the IMF’s continued support as a vote of confidence and believes it will bolster investor sentiment.
Western officials have previously accused China of delaying the process, an allegation Beijing denies. Meanwhile, international bondholders have felt excluded from the negotiations.
“It is good that the OCC can voice their concerns,” Martin acknowledged, but stressed the urgency of reaching a resolution for Zambia’s sake. “The protracted negotiations are taking a toll on the country’s economic recovery,” she warned.
With continued economic pressures and ongoing uncertainty about the debt restructuring, Zambia faces a delicate balancing act in the weeks and months ahead. Successfully navigating these challenges will be crucial for restoring stability and paving the way for sustainable economic growth.
