IMF Hails Zambia Over Debt Agreement With Creditors

Posted by Eric Ojo Business News, Featured, Latest Headlines Friday, June 23rd, 2023

(AFRICAN EXAMINER) – The International Monetary Fund (IMF) has commended the Zambian Government for the Debt Treatment Agreement it signed with its official creditors under the Group of 20 (G20) Common Framework.

The G20 is an intergovernmental forum comprising 19 countries and the European Union (EU). It works to address major issues related to the global economy, such as international financial stability, climate change mitigation, and sustainable development.

The Common Framework considers debt treatment, on a case-by-case basis, driven by requests from eligible debtor countries.

In response to a request for debt treatment, a Creditor Committee is convened. Negotiations are supported by the IMF and the World Bank, including through their Debt Sustainability Analysis.

The idea is that the debt treatment under the Framework should be accompanied by reforms ensuring the future sustainability of public debt, and consistent with the parameters of an Upper Credit Tranche (UCT) IMF-supported programme.

The Framework represents a step change for official creditors, bringing together the Paris Club and G20 official bilateral creditors in a coordinated process.

Notably, such approach will allow to address solvency challenges with a long-term perspective, ensuring the participation of private sector creditors and of other official creditors through the comparability of treatment clause included in the multilateral agreement, which implies that they provide debt treatments on terms as least as favourable.

It is intended to deal with insolvency and protracted liquidity problems, along with the implementation of an IMF-supported reform programme. G20 official creditors, both traditional “Paris Club” creditors, such as France and the United States, and new creditors, are China and India,

Moreover, the Framework requires private creditors to participate on comparable terms to overcome collective action challenges and ensure fair burden sharing.

Managing Director of IMF, Ms. Kristalina Georgieva gave the commendation in a statement made available to the Monday on Thursday.

“I warmly welcome Minister of Finance Situmbeko Musokotwane’s announcement that the Zambian authorities have reached an agreement with their official creditors on a debt treatment, consistent with the objectives of the IMF-supported programme”, she said.

“This unique and innovative agreement, according to her, specifies both a baseline and a contingent treatment that would be automatically triggered if the assessment of Zambia’s economic performance and policies improves.

“I want to thank the official creditor committee, especially co-chairs China and France and Vice-Chair South Africa, for all their work to reach this agreement. This is a significant milestone for the G20 Common Framework under which China, India, Saudi Arabia and Paris Club creditors joined forces to agree deep debt relief for Zambia.

“This agreement paves the way for the completion of the first review of Zambia’s three-year Extended Credit Facility Arrangement, which is helping put Zambia on a path toward sustainable economic growth and poverty reduction.

“I look forward to the Executive Board taking up this review in the coming weeks and the continuation of our productive collaboration with Zambia in the period ahead”, she stressed.