IMF and Government Resume Talks

The International Monetary Fund and the Government are set to resume talks next week, with a consultative and information exchange mission scheduled for June 22 until July 1.

Government had previously sought a Covid-19 credit facility from the fund, which approved debt service relief for 25 member countries in April in response to the pandemic.

The IMF recently forecast a contraction of the economy by 3.5%, citing power shortages as a significant problem in addition to the current coronavirus pandemic.

Zambia’s estimated revenue for 2020 is predicted to fall by at least 20%, or K14.8 billion, as a result of Covid-19, Finance Minister Bwalya Ngandu has said.

Meanwhile, external debt stock continues to rise and now stands at US$11.2 billion, up from just US$1.9 billion in 2011. According to the Minister the latest increases came as a result of new disbursements on existing loans mostly earmarked for infrastructure development.

“Zambia will now discuss with the fund on an appropriate macro-economic framework that will lead to a programme eventually,” the minister previously confirmed in April.

Relations with the IMF have proved trouble under President Lungu’s government. A bailout had been under discussion, on and off, for more than five years, with the Government rejecting an initial proposal in 2015, before returning to the negotiating table. The President then challenged the IMF to leave the country if they felt he had gone beyond the norms of good governance and democracy following the declaration of a state of emergency in 2017. The fund subsequently withdrew its representative to Zambia in August 2018. The major stumbling block to a deal appears to be concerns regarding Zambia’s debt sustainability.

Government earlier this week asked the Paris Club of creditor nations to suspend principal and interest payments on its debts to all official creditors until the end of December. 

Zambia has been listed among countries eligible for debt relief under the Debt Service Suspension Initiative, which aims to help nations respond to the health challenges and economic shocks of the Covid-19 pandemic.

However, lenders have been reluctant to extend further credit to Zambia during the crisis, with the IMF citing existing high debts as a principal reason for not extending its Covid-19 relief funding to Zambia.