Zambia will conclude a deal with the International Monetary Fund for as much as $1.6 billion by the end of June, Finance Minister Felix Mutati said.
“We will conclude by the end of the second quarter,” Mutati said in an interview Wednesday in Nairobi, the Kenyan capital. “There is no question on whether the deal comes through or not. The deal is coming through.”
The country has been talking about getting IMF aid since 2014 but an agreement has been delayed by two presidential elections, which made the required reforms politically unattractive. A team from the Washington-based lender visited Zambia last month and will return at the end of May to continue the discussions, according to Alfredo Baldini, the fund’s representative in the country.
The southern African nation, the continent’s second-biggest copper producer, has struggled with ballooning budget deficits in recent years as metal prices fell and government spending increased.
The IMF is evaluating Zambia’s loan application and the nation can secure $1.3 billion to $1.6 billion, Mutati said. “You submit and have a conversation,” he said. “They have internal evaluation; they come back and ask questions. It’s a typical process that happens to all countries without exception.”
The IMF loan would be a “growth enabler” and help the government to broaden its sources of external credit, Mutati said. Zambia’s external debt has increased to $6.9 billion while the total debt stock stands at about $10 billion, according to the government. It has sold $3 billion in Eurobonds, the most recent sale being $1.25 billion in 2015.
The IMF forecasts Zambia’s economic growth will accelerate to 3.5 percent this year, from 3 percent in 2016. That’s close to worst performance since 1998, when the economy contracted by 0.4 percent. Copper has gained 18 percent over the last 12 months in London but is still 38 percent down over the last six years.
Economic growth is buoyed by rising foreign-exchange reserves, a stable currency and increasing metal prices that have boosted export earnings, Mutati said.
“It’s not an issue about the actual figure, the issue is about what financing gap we want to fill,” Mutati said. “We will get from other sources using the IMF as a launchpad.”
Zambia won’t spend beyond its means and is cutting expenditure on capital projects that the economy doesn’t need to make debt manageable, Mutati said.