Johannesburg, July 14, 2023: International Monetary Fund (IMF) on Friday said Zambia’s long-delayed external debt restructuring will save the southern African country 7.65 billion dollars by 2026.
IMF made the statement in a report after it approved the latest payout from a 1.3 billion dollars rescue loan.
In September, IMF said the expected figure is lower than the 8.4 billion dollars debt relief that Zambia needed, which bilateral creditors including China and international bondholders had challenged due to the size of debt cuts that this entailed.
The IMF in a staff report, said restructuring the country’s overseas debt will cover 72 per cent, or 7.65 billion dollars of its balance of payments gap between 2022 and 2025.
The country’s overseas debt had reached 20.9 billion dollars at the end of 2022.
The IMF’s executive board on Thursday approved an immediate disbursement of 189 million dollars to Zambia following its first review of the programme.
This came after the country secured a deal in June with official bilateral creditors to rework about 6.3 billion dollars of its overseas debt with Paris Club members and China, among others.
Zambia was the first African country to default on its sovereign debt in 2020 during the COVID-19 pandemic, and faced lengthy delays in restructuring negotiations.
The IMF report said Zambia’s official creditor committee met seven times after forming in June 2022 and held “several technical workshops” with points of contention including the exclusion of overseas local bondholders from the restructuring.
Foreign holdings of domestic debt fell from 29 per cent at the end of 2021 to 22 per cent a year later, a proportion maintained in the first third of 2023, it said.
“Uncertainty around the debt restructuring process has led to a sharp drop in investor demand for domestic government securities,” the report said.
Using a contingent debt instrument where Zambia will pay more if its economy performs better emerged as a solution at the third official creditor meeting in January, with the agreement finally reached on June 22, the IMF said.
