Government Reaches Crucial Agreement To Borrow 1.4 Billion Dollars Over Three Years
The International Monetary Fund (IMF) and the Zambian Government reached a staff level agreement on Friday over a $1.4 billion three-year extended credit facility.
President Hakainde Hichilema identified such a deal as an economic priority fro his new dawn government back in October, and started talks with the IMF in early November.
Allison Holland, IMF mission chief for Zambia, released a statement concerning the deal last week:
“This agreement is based on the authorities’ plans to undertake bold and ambitious economic reforms.”
“The staff-level agreement is subject to IMF Management and Executive Board approval, and receipt of the necessary financing assurances. Further details on the agreement will be released on Monday.”
Finance Minister Situmbeko Musokotwane echoed these optimistic sentiments, commenting, “The IMF programme will provide much needed fiscal space to Zambia and anchor our domestic economic programme.”
Dr. Msokotwane said that this loan will be in addition to the $1.3 billion SDR allocation that was received in August 2021.
“Reaching a Staff-Level Agreement was one of the immediate objectives of the New Dawn Government and a directive by His Excellency, Mr. Hakainde Hichilema, President of the Republic of Zambia that the Ministry should finalize negotiations with the Fund, that had protracted for years, within the shortest possible time, and this is exactly what we have done,” he said.
The Finance Minister also elaborated on what the domestic economic programme entails, explaining that it is based on four pillars that include economic transformation and job creation, human and social development, environmental sustainability and good governance.
“As a result of the policies underpinning the IMF programme, we will be able to prioritize human development and meet critical Government programmes including social sector spending in health and education,” Msokotwane stated.
This economic policy package reflects government’s objectives such as provision of bursaries and meal allowances to vulnerable students, as well as the implementation of the decentralized programmes under the Constituency Development Fund (CDF).
“We have engaged in many months of rigorous discussions and consultations to agree on an economic and financial policy package that will help us restore debt sustainability, build a productive and resilient economy, and sustain the livelihoods of our people”
“The Staff-Level Agreement paves the way for debt restructuring talks with our creditors. Upon reaching an understanding with the creditors, including through the G20 Common Framework for Debt Treatment, the IMF Board will consider Zambia’s application for the ECF Programme. Upon Board approval, we will have access to highly concessional financing from the IMF and will also be able to start accessing financial support from other multilateral and bilateral partners. Having a programme in place will boost investor confidence and move our economy towards a sustainable economic growth trajectory,” Dr Musokotwane noted.
The Finance Minister concluded his statement by thanking the IMF team and his colleagues at the Zambia treasury for all their hard work towards reaching this staff-level agreement, and announced a joint press briefing for Monday 6th December with Ms. Holland, during which further details on the agreement will be provided and questions answered.