Government Tries For IMF Deal Again

The PF Government will once again hold talks with the International Monetary Fund (IMF) this week. Talks over a potential bail out deal have been on and off throughout President Lungu’s presidency. However, the latest round of talks will take place between two major events: the debt default that took place at the end of 2020 when government failed to make a payment on one of its Eurobonds, and the 2021 elections expected in August. 

Finance Minister Bwalya Ng’andu has made it clear that the government hopes to secure a loan before the polls in August. However, analysts have advised that a deal is unlikely to be achieved in such a short time given the government's current position. 

The situation has become urgent with Zambia’s external debt now standing at around the $12 billion mark. While President Lungu has recently attempted to shift blame onto the coronavirus pandemic, even before the virus hit the country debt had more than doubled during President Edgar Lungu’s time in office, growing from $4.8 billion in 2014 to $11.8 billion in 2019.   

In fact, Zambian economist Grieve Chelwa estimates that total external debt has grown 1,000% since the Patriotic Front came to power in 2011.   

The high volume of debt is causing severe problems for Zambians, with annual inflation rising by 25% as food and other essential items become more and more expensive. The Government spends almost half its revenues paying off and servicing existing loans, leaving insufficient funds to support citizens and stimulate the economy. 

Zambia’s debt problem made international headlines in November when the Government defaulted on its debt as it failed to meet the deadline for a $42.5 million payment on one of its Eurobonds. The Government then skipped another coupon payment due on January 30 worth $56.1 million on its Eurobond maturing in 2027.  

The latest round of talks will take place virtually and are set to commence on February 11 and run until March 3.