The International Monetary Fund and the Zambian government on Friday reached a staff level agreement on a $1.4 billion, three-year extended credit facility.
“This agreement is based on the authorities’ plans to undertake bold and ambitious economic reforms,” Allison Holland, IMF mission chief for Zambia said in a statement.
“The staff-level agreement is subject to IMF Management and Executive Board approval and receipt of the necessary financing assurances. Further details on the agreement will be released on Monday.”
President Hakainde Hichilema, who was elected in August, had started talks with the IMF in early November.
“The IMF programme will provide much needed fiscal space to Zambia and anchor our domestic economic programme,” Finance Minister Situmbeko Musokotwane said in a statement.
Dr Msokotwane said this will be in addition to the US$1.3 billion SDR allocation that was received in August 2021.
“Reaching a Staff-Level Agreement was one of the immediate objectives of the New Dawn Government and a directive by His Excellency, Mr. Hakainde Hichilema, President of the Republic of Zambia that the Ministry should finalize negotiations with the Fund, that had protracted for years, within the shortest possible time, and this is exactly what we have done,” he said.
The Finance Minister added that the IMF programme will provide much needed fiscal space to Zambia and anchor its domestic economic programme, which is based on four pillars that include, economic transformation and job creation, human and social development, environmental sustainability and good governance.
“As a result of the policies underpinning the IMF programme, we will be able to prioritize human development and meet critical Government programmes including social sector spending in health and education,” he stated.
He stated that the policy package also reflects government’s objectives such as provision of bursaries and meal allowances to vulnerable students as well as the implementation of the decentralized programmes under the Constituency Development Fund (CDF).
“We have engaged in many months of rigorous discussions and consultations to agree on an economic and financial policy package that will help us restore debt sustainability, build a productive and resilient economy, and sustain the livelihoods of our people, he added.
“The Staff-Level Agreement paves the way for debt restructuring talks with our creditors. Upon reaching an understanding with the creditors, including through the G20 Common Framework for Debt Treatment, the IMF Board will consider Zambia’s application for the ECF Programme. Upon Board approval, we will have access to highly concessional financing from the IMF and will also be able to start accessing financial support from other multilateral and bilateral partners. Having a programme in place will boost investor confidence and move our economy towards a sustainable economic growth trajectory,” Dr Musokotwane noted.
He has since thanked the IMF team, and the Zambian team for the hard work that led to reaching a staff-level agreement.
He further announced that on Monday 6th December, 2021, he will hold a joint press briefing with the IMF Mission Chief to Zambia, Ms. Allison Holland, during which we will provide more detail on the Staff-Level agreement and will be able to answer questions.
In late October, Zambia promised to slash its budget deficit and curb borrowing in a bid to secure IMF support, as well as reduce spending on politically-sensitive subsidies – such as on power, fuel and farming – likely to have been one of the fund’s key demands.
Zambia’s external debt includes around $3 billion in international bonds, $2.1 billion to multilateral lending agencies such as the IMF and another $3 billion to China and Chinese entities.