The signing of a Memorandum of Understanding (MOU) between Zambia and its official creditors marks a significant milestone in Zambia’s efforts to address its debt crisis. The Center for Trade Policy and Development (CTPD) believes that this agreement will pave the way for increased resources to be allocated to development projects, thus benefiting the nation’s economic growth.
Isaac Mwaipopo, the Executive Director of CTPD, emphasized the positive impact of the MOU on Zambia’s quest to alleviate its debt burden. He noted that this development will enable the government to allocate more resources to areas in need of development. In the past, a substantial portion of the government’s budget was directed toward servicing the national debt annually.
Mwaipopo’s comments come in light of International Monetary Fund (IMF) Managing Director Kristalina Georgieva’s praise for Zambia’s agreement with official creditors. Georgieva has described the MOU as great news and extended her congratulations to the Zambian government for reaching this crucial milestone.
Zambia and its official creditors reached an agreement on a comprehensive debt treatment in June 2023. The MOU formalizes this agreement and represents an important step toward ensuring long-term debt sustainability. The co-chairs of Zambia’s Official Creditor Committee are China and France, with South Africa serving as Vice-Chair.
With the signing of the MOU, each official creditor will initiate their internal processes to formalize the agreement. Subsequently, the terms outlined in the MOU will be implemented through bilateral agreements with each member of the Official Creditor Committee.
The Ministry of Finance and National Planning in Zambia is optimistic that the formalization of the Official Creditor Committee agreement will further support the country’s ongoing efforts to secure a comparable agreement with its private creditors, ultimately resolving the debt overhang.
The signing of this MOU is seen as a positive step forward in Zambia’s path toward achieving long-term financial stability and fostering economic development.