Zambian finance minister says IMF program needed for orderly debt restructuring

Zambia’s Finance Minister Situmbeko Musokotwane addresses participants during the launch of the initial public offering of Zambia’s Konkola copper mine in the capital Lusaka November 17, 2010. REUTERS/Mackson Wasamunu/File Photo

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LUSAKA, May 6 (Reuters) – An orderly process of restructuring Zambia’s debt will be difficult to achieve without an IMF programme, Finance Minister Situmbeko Musokotwane said on Friday, confirming that China and bondholders would join the negotiations.

Musokotwane told reporters he expects an International Monetary Fund program to be concluded by the end of June, and the World Bank has also pledged to provide financial resources to the country once the agreement with the IMF concluded.

In 2020, Zambia became the first country to default in the era of the pandemic, struggling with debt of nearly $32 billion, or around 120% of its gross domestic product.

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The country’s creditors must now sit down together to agree what debt relief they will offer, Musokotwane said.

“China has finally agreed to join us, to be part of the Common Framework. The other class of creditors, namely the bondholders, have also expressed their willingness to engage,” Musokotwane said.

The Group of 20 major economies set up a new debt negotiation process, the Common Framework, in 2020 in response to the coronavirus pandemic, to engage creditor countries, including China, and the Club of Paris of the main lending countries.

Zambia must reach a debt sustainability agreement with official creditors through this process in order to unlock IMF financing.

Zambia expects a total of $564 million from the World Bank, of which $275 million in budget support will only be released when the IMF board approves Zambia’s program, the Treasury Secretary says Felix Nkulukusa to journalists.

Nkulukusa said Zambia was expecting an additional $654 million from the World Bank under another three-year program starting in July this year.

Musokotwane had said Zambia’s debt restructuring process was “stuck” at IMF meetings last month after the country secured a staff-level deal on a $1.4 billion credit facility. dollars over three years with the fund in December.

China, which holds $5.78 billion in Zambian debt, later offered to co-chair Zambia’s creditors’ committee at the meetings. South Africa and France have also offered to co-chair, the South African finance ministry said.

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Reporting by Chris Mfula, writing by Olivia Kumwenda-Mtambo and Rachel Savage; Editing by Hugh Lawson, Andrew Heavens and Tomasz Janowski

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