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IMF approves N$22 billion loan to Zambia


THE International Monetary Fund (IMF) has approved extending a N$22 billion (US$1,3 billion) credit facility to Zambia to restore macroeconomic stability and foster better, more resilient, and more inclusive growth.

Equivalent to 978,2 million special drawing rights, this new extended credit facility (ECF) is expected to advance the authorities’ homegrown reform plan to restore debt sustainability, create fiscal space for much-needed social spending, and strengthen economic governance.

The fund says securing timely restructuring agreements with external creditors will be essential for the successful implementation of the new ECF arrangement.

This N$22 billion is equivalent to 100% of their special drawing rights quota.

Zambia is currently suffering the consequences of years of economic mismanagement, with an especially inefficient public investment drive.

Growth has been too low to reduce rates of poverty, inequality, and malnutrition that are among 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.

The ECF-supported programme will help to re-establish sustainability through fiscal adjustment and debt restructuring, create fiscal space for social spending to cushion the burden of adjustment, and strengthen economic governance, including by improving public financial management.

The IMF’s managing director, Kristalina Georgieva, says Zambia continues to face profound challenges reflected in high poverty levels and low growth, and the ECF-supported programme aims to restore macroeconomic stability and foster better, more resilient and more inclusive growth.

She says restoring fiscal sustainability will require a sustained fiscal adjustment.

“The authorities’ adjustment plans appropriately focus on eliminating regressive fuel subsidies, enhancing the efficiency of the agricultural subsidy programme, and reducing inefficient public investment,” Georgieva says.

This means the country will remove fuel subsidies, and also implement some fiscal consolidation on investments.

The director says domestic revenue mobilisation also needs to support the medium-term adjustment.

“The adjustment creates fiscal space for increased social spending to cushion the burden on the most vulnerable, help reduce poverty, and to invest in Zambia’s people. The ongoing expansion of the authorities’ social cash transfer programme and their plans to increase public spending on health and education are particularly welcome.

“Together with the fiscal adjustment, Zambia needs a deep and comprehensive debt treatment under the G20 Common Framework to restore debt sustainability,” Georgieva says.

Zambian president Hakainde Hichilema says the extended credit facility programme will be implemented over 38 months and contains economic and financial policies anchored on development outcomes of the country’s eighth development plan.


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