Zambia wins IMF board approval for $1.3 billion loan program By Reuters

By Jorgelina do Rosario and David Lawder

(Reuters) -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.”

In 2020, Zambia became the first African country in the pandemic era to default. The restructuring of its external debt, which amounted to more than $17 billion at the end of 2021, is seen by many analysts as a test case for the region.

It is one of three southern African countries, along with Chad and Ethiopia, that have sought restructuring under a G20 common debt restructuring framework.

Zambia reached a staff-level agreement with the IMF last December on an ECF program valued at $1.4 billion at that time, conditional upon its ability to reduce debt to levels the Fund deems sustainable.