The International Monetary Fund (IMF) comes to the rescue of Zambia after it faced an inability to pay its loans faced to the Covid-19 Pandemic which made the loans a burden for the nation.
IMF has now approved a $1.3 billion to assist the debt-ridden nation after it was the first African country to default on foreign debt.
Zambia Africa’s second-largest copper producer has been struggling to jumpstart its economy with debts that have accumulated to a 120% of its GDP.
According to official government data, the southern African country’s debt totaled $31.74 billion at the end of 2021, of which $17.27 billion was external debt, mostly from two Eurobonds and China.
The relief came about after the country had reached a tentative agreement with IMF in December for a $1.3 billion facility, contingent on Zambia taking steps to reduce its debt to levels IMF deemed sustainable.
The new government under Hakainde Hichilema is seen to be making progress towards restoration of relations with its donors as it strides toward tackling economic mismanagements witnessed earlier on.
The IMF says the $1.3 billion credit line will help Lusaka’s homegrown reform plan to “restore debt sustainability, create fiscal space for much-needed social spending, and strengthen economic governance”.
“Zambia is in debt distress and needs a deep and comprehensive debt treatment to place public debt on a sustainable path”.
The IMF statement 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.
Through the agreement of IMF and the president, IMF’s Executive Board will unlock an immediate disbursement of about $185 million.
President Hakainde further assured that his government would avoid borrowing in reckless manners as it is mainly focused on reforming the economy.