On Zambia’s prospects for further IMF support by Bright Chizonde

Zambia is currently implementing a 38-month IMF program under the Extended Credit Facility (ECF). This arrangement was approved by the IMF Executive Board on August 31, 2022.

It is important to note that Zambia is expected to demonstrate progress in implementing a range of measures called “structural benchmarks” and quantitative performance criteria as a condition for further release of funds, out of the total USD1.3 billion.

So far, Zambia has only received the initial down payment of about USD188 million. This down payment was released following the IMF Board approval of the entire program (first staff level agreement). The second release of another USD188 is however not that straightforward.

As part of the process leading up to the second release of funds, an IMF staff team came to Zambia and held meetings in Lusaka from March 22 to April 5, 2023, to discuss progress on reforms and the policy priorities of the government.

The IMF staff were generally impressed by the progress made by the Zambian government and consequently, on 6th April 2023, the IMF staff announced that all the structural benchmarks and quantitative performance criteria for the first review were met.

However, just like the first staff-level agreement, this new second staff-level agreement will also require IMF-Board approval. In the case of the first staff-level agreement, Board approval and fund release was conditioned on getting “financial assurances” that the creditor are willing to extend debt forgiveness or debt restructuring. This time around, we need “financial assurances” in the form of actual debt restructuring arrangements or agreements with our official creditors.

Therefore, in order for Zambia to receive the next UDD188 million, it needs to engage with its “official creditors”, including China, to obtain agreements or arrangements on how the debt will actually be restructured. This means the official creditors should agree on how much to forgive and the new relaxed repayment terms in order for Zambia to get debt relief.

Judging from how difficult it was to get the creditors to give the first financial assurances that they were on board, this second undertaking is not going to be easy.

Zambia is therefore supposed to push even harder and should begin thinking hard about alternatives.

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