Zambia has reached an agreement in principle with the IMF on an extended credit facility of $1.4 billion. But its disbursement remains subject to an agreement between Lusaka and its creditors on reducing the debt to sustainable levels.
China on June 17 urged the International Monetary Fund (IMF) to “quickly” approve and disburse a $1.4 billion bailout package for Zambia, as the official creditors’ committee failed to had not yet endorsed a debt restructuring plan for this southern African country which had defaulted in November 2020.
“The Chinese side appeals for the IMF to quickly approve and disburse the Extended Credit Facility for Zambia,” said Director General of the African Affairs Department of the Chinese Foreign Ministry, Wu Peng, at the end of the meeting. a meeting with the President, Hakainde Hichilema, in Lusaka.
Beijing’s appeal to the IMF comes 24 hours after the first meeting of Zambia’s official creditors’ committee was held on Thursday, June 16. This meeting devoted to discussions on the restructuring of the debt of this country which had ended 2020, default on the repayment of three eurobonds did not lead to an agreement.
At the end of his meeting with the Chinese diplomat, the Zambian president thanked China for agreeing to co-chair the meeting of the official committee of creditors with France. “Zambia’s debt situation must be unblocked so that the economy can be opened up,” he said.
Declaring himself “delighted” to see that a telephone conversation he had on Sunday June 12 with his Chinese counterpart Xi Jinping, “has already started to bear fruit”, Hakainde Hichilema also indicated that Beijing and Lusaka “have agreed to work closely together to strengthen their relationship”.
Zambia is struggling with a debt representing 120% of its GDP. Its external debt topped $17 billion at the end of 2021, a third of which was owed to China, according to Zambian government data.
China, which had long been reluctant to join the debt service suspension initiative (DSSI) of the group of twenty major economies on the planet (G20), a mechanism created in 2020 to relieve countries collapsing under the weight of the debt, agreed last April to co-chair Zambia’s official creditors’ committee with France.
Zambia reached an agreement in principle with the IMF on a $1.4 billion extended credit facility in December 2021. But the institution announced that the approval of this financing is subject to obtaining guarantees from the share of the country’s creditors on debt relief.