The International Monetary Fund has approved a $1.3 billion loan to debt-ridden Zambia to help it restore fiscal stability while urging the country to battle corruption.

In 2020, as the Covid-19 pandemic battered Africa, Zambia became the first country on the continent to default on its foreign debt — estimated at $17.3 billion.

Last December, the copper-rich nation clinched a tentative agreement with IMF staff to provide $1.3 billion in support funds, but only if it took credible steps to reduce its debt load to levels deemed sustainable.

Zambia’s Finance Minister Situmbeko Musokotwane on Thursday described signing the IMF deal as “a moment of joy”, saying a year ago “everyone recognised that Zambia was bankrupt because of unsustainable debt”.

“Now… you can see the confidence is coming back,” Musokotwane told a press conference in Lusaka.

In a statement released late Wednesday, the IMF said the facility will help Lusaka’s homegrown reform plan to “restore debt sustainability, create fiscal space for much-needed social spending, and strengthen economic governance”.

The Fund said the new government of Hakainde Hichilema, which came to power a year ago, is having to tackle years of economic mismanagement.

“A substantial strengthening of fiscal controls is needed to support the fiscal adjustment, as well as address governance and corruption vulnerabilities,” said IMF managing director Kristalina Georgieva.

– ‘Debt distress’ –

The IMF said Zambia’s economic growth “has been too low to reduce rates of poverty, inequality, and malnutrition that are amongst the highest in the world.

“Zambia is in debt distress and needs a deep and comprehensive debt treatment to place public debt on a sustainable path.”

Minister Musokotwane said his government had agreed on several policy measures, including better control of public borrowing, increased transparency and monetary policy to anchor price stability.

These would assist the country “not to relapse into the bad old ways of spending and (getting) into debt” and to “create a platform from which the economy can rebound” so that growth resumes, and jobs and wealth are created, he said.

He said the IMF programme would allow Zambia to sit down with creditors and discuss measures to service and restructure its debt.

Since last year’s election, Hichilema’s government has made progress in restoring relations with donors.

The IMF’s announcement “is a vote of confidence in your government and in the people of Zambia”, Hichilema said in a Facebook post.

“The international community has recognised the progress we have made and our commitment to reviving our economy and become a responsible member of the family of nations,” he said.

IMF representative for Zambia Preya Sharma said the deal was for a highly concessional loan, with zero interest rate, adding the amount had to be repaid within 10 years.


© Agence France-Presse