Zambia appeals for IMF aid amid debt restructuring delays

Zambia’s finance minister has asked the IMF to release $188m to the southern African nation even if its creditors are not able to reach agreement on how to deal with the nation’s debt.

“What will be the point of punishing a country that is performing?” Situmbeko Musokotwane said in an interview on Bloomberg Television on Tuesday when asked what happens if a restructuring deal faces continued delays.

“Zambia has performed according to the programme, so it must not be punished. It must be rewarded,” Musokotwane said.

The finance chief spoke in Washington, where he is meeting IMF executive directors during the organisation’s spring meetings “to appeal to them” for a solution.

The second disbursement from the IMF was scheduled to be available on April 1, according to the programme deal reached last year.

“Let’s work together to make sure that the debt is resolved,” he said. “Given the possibility that the MOU [memorandum of understanding] is not signed, Zambia should not be punished.”

Zambia was the first African nation to default and seek restructuring after the start of the Covid-19 pandemic, and has become a crucial test case for a new global mechanism to rework poor countries’ debts, while the list of governments unable to afford servicing them keeps growing.

ELUSIVE

The mechanism — known as the Common Framework and introduced by the G20 forum — has faced repeated roadblocks, and an April 12 meeting convened by the IMF, World Bank and current G20 chair India will try to reach greater consensus on how to deal with debt.

While Musokotwane said the level of engagement with creditors had “intensified in the past few weeks”, a deal remains elusive. Earlier this month, the IMF provided a fresh impetus for an agreement by saying it cannot approve a $188m payment to Zambia until the official creditors agree to provide relief.

“I would not rest until they do,” IMF MD Kristalina Georgieva said in an interview in Washington last week.

“I’m going to pursue the creditors until they deliver.”

Zambia’s official creditors committee, which China and France co-chair, will meet again next week and World Bank president David Malpass raised the possibility that they may strike a restructuring deal. A meeting between the US and Chinese ambassadors to Zambia in the capital Lusaka this month also raised hopes.

When asked if creditors might finally agree on relief next week, Musokotwane said: “We are hoping so. There have been lots of sideline meetings.”

He added: “We are certainly hoping there could be a breakthrough.”

Local currency government debt would not be considered for restructuring, Musokotwane said. Zambia’s kwacha has been sliding in part because foreign investors have shunned local currency debt auctions for fear of the notes being restructured, according to the central bank.