IMF approves $1.3bn loan for debt-stressed Zambia

Zambia, the first African country to default on its debt in the COVID-19 era, has won International Monetary Fund board approval for a $1.3bn support package, an important step towards the nation restructuring its debt and a boost for the global effort to help indebted developing nations.

The lending plan — an Extended Credit Facility (ECF) over 38 months — will be vital to keeping the country’s economy afloat and positioning Zambia as a model for resolving Africa’s debt crises. The 38-month extended credit facility is based on the south African country’s “home-grown economic reform plan that aims to restore macroeconomic stability and foster higher, more resilient, and more inclusive growth”, the Washington-based IMF said in a statement. Zambia’s President Hakainde Hichilema has pledged to improve the country’s financial situation. “They approved our extended credit facility for this great country whose greatness lies ahead of us and for us to make our country greater we have to do what is necessary in all the spheres and in all the areas,” said Hichilema.

Africa’s second-biggest copper producer became the continent’s first pandemic-era sovereign defaulter in 2020, and was seeking endorsement from the Washington-based lender as the government tries to finalize negotiations to revamp external liabilities that grew to $17.3bn by the end of 2021. Nearly one-third of the debt — $5.78 billion — is owed to China. In November 2020, Zambia was unable to make its payments on a $42.5 million Eurobond and in July of this year, the country canceled projects worth $2 billion to prevent its debt from growing further. The country plans to increase copper production to 3 million tons a year in the next 10 years and produce foodstuffs for export in an effort to reduce its debt.