Zambia won International Monetary Fund approval for a $1.3 billion, 38-month loan program on Wednesday, a crucial step in the southern African country's quest to restructure its debts and rebuild an economy ravaged by mismanagement and COVID-19.
The IMF said in a statement that the new Extended Credit Facility arrangement would provide total funding of 978.2 million Special Drawing Rights - about $1.3 billion at current exchange rates - equivalent to 100% of Zambia's Fund quota, or shareholding.
Approval by the IMF's Executive Board will unlock an immediate disbursement of about $185 million, the Fund said.
Zambia's creditors led by China and France pledged in late July to negotiate a restructuring of the country's debts, a move that IMF Managing Director Kristalina Georgieva had welcomed as "clearing the way" for the new Fund program.
"Zambia continues to face profound challenges reflected in high poverty levels and low growth," Georgieva said on Wednesday. "The ECF-supported program aims to restore macroeconomic stability and foster higher, more resilient, and more inclusive growth."
The IMF program aims to restore Zambia's macroeconomic stability through fiscal adjustment and debt restructuring and strengthening economic governance.
Georgieva said this would require "sustained" spending reductions and that Zambian authorities were appropriately focused on eliminating "regressive" fuel subsidies, reforming agricultural subsidies, reducing inefficient public investments and increasing tax revenues. This will free up some fiscal space to increase social spending to ease transition burdens on the most vulnerable, she said.
