LONDON: Zambia’s official creditors, led by China and France, agreed to provide financing assurances the country has been waiting for to secure final approval from the International Monetary Fund (IMF) for a US$1.4bil (RM6.2bil) bailout.
The commitments to provide debt relief were the final hurdle needed for the Washington-based lender’s board to sign off on a deal Zambia first requested in 2019.
It’s a significant step in a slow-moving debt-restructuring process that the government started in 2020, when it became Africa’s first pandemic-era sovereign defaulter.
“The support from the Official Creditor Committee for Zambia’s envisaged IMF-supported programme, together with its commitment to negotiate debt restructuring terms, provides the IMF with official financing assurances,” IMF managing director Kristalina Georgieva said.
“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 partner,” she said in a statement.
The IMF loan that will be disbursed over three years also comes at a crucial time for Zambia.
It faces a steep increase in fuel and fertiliser-import bills and a collapse in the price of copper, which the nation relies on for more than 70% of export earnings
The bilateral creditors met for a second time July 18 to consider Zambia’s request to rework dollar liabilities that grew to US$17.3bil (RM76.9bil) at the end of last year.
Chinese lenders account for more than one-third of the total, and faced blame for delaying progress on Zambia’s restructuring.
The government is using the so-called Common Framework that the Group of 20 wealthy nations drew up in 2020 to help poor countries restructure unsustainable debts in the wake of the Covid-19 pandemic. That process calls for official creditors to agree on reducing debt in net-present value terms if needed, and extending maturities.
This week’s committee meeting of Zambia’s 16 official creditors “gives some sign of hope” in a process that had stalled, World Bank president David Malpass said July 19.
Ethiopia and Chad also applied to rework their debt using the Common Framework, with no resolution yet.
Zambia’s next steps will include meeting with commercial creditors, including the holders of its US$3bil (RM13.3bil) of eurobonds, to seek relief “at least as favourable as that provided by official bilateral creditors,” as required by the framework. —Bloomberg