Commitment to Effective Implementation of the Economic Recovery Plan Crucial for Zambia-IMF Talks

Zambia’s debt problems have persisted, following the refusal by bondholders to agree to a Six Months Debt Service Suspension Initiative (DSSI), mainly underpinned by fears that other creditors, like China, would have continued seeking repayments while they [bond holders] have suspended them. The country has consequently accrued arrears after failing to honour its $42.5 million and $56.1 million coupon payments in November,2020 and January,2021, respectively.As Zambia sets to engage with the International Monetary Fund (IMF) on a possible Extended Credit Facility (ECF) program during the ‘talks’ scheduled for 11th February to 3rd March,2021, The Centre for Trade Policy and Development (CTPD) holds the view that Government will need to prepare a ‘strong case’ which will demonstrate that its commitment to attain fiscal and debt sustainability will not be encumbered by ‘the wind of the upcoming general elections’. Ideally, we expect the talks with the IMF this time around to be cordial, premised on the fact that Zambia will go to the negotiation table with a well-documented recovery strategy which seeks to restore growth, macroeconomic stability, and debt sustainability as enshrined in the recently launched Economic Recovery Plan (ERP). However, Government will need to further commit to full implementations of the reforms and strategies in the ERP and ensure that the upcoming elections do not delay the IMF deal.Based on the concerns about Chinese debt raised by the bond holders and cited as the basis of their refusal to agree to a DSSI last year, CTPD notes that there is a new wave of hope on the horizon as the G20 countries have agreed to a common framework that will offer signatory countries like Zambia a level playing field to reduce and reschedule debt to sustainable levels. The framework offers more hope because, unlike the DSSI, it includes countries beyond the Paris Club such as China and commits to ensure comparability of treatment of all creditors. This implies that China will now be obliged to treat debt payments on comparable terms which will then expectedly ease Government’s re-engagements with the bond holders and other creditors to agree to a debt restructuring process. However, we remain cognizant that Zambia’s admission to a debt treatment under the framework largely depends on the conclusions of the upcoming engagements with the IMF. Therefore, it will be imperative for Zambia to conclude its Debt Sustainability Analysis (DSA) and make significant progress towards securing an Extended Credit Facility (ECF) program during the upcoming discussions with the IMF.

Issued by:Wakumelo Mataa (Mr)CTPD Researcher -Public Finance

Editor’s Note

The Centre for Trade Policy and Development (CTPD) is a not- for –profit, membership-based trade policy and development think tank. The organization was established in 1999 and existed as the civil society trade network (CSTNZ), until 2009 when it was rebranded as the Centre for Trade Policy and Development (CTPD).The mandate of CTPD is to influence pro-poor trade and investment reforms at national, regional and multilateral levels as well as facilitate the participation of various stakeholders including member organizations in ensuring that trade is used as a tool for poverty eradication.For more information you can Email:info@ctpd.org.zm. or Visit our web site [www.ctpd.org.zm] You can also follow our TWITTER Account -@CTPDZambia Address: office Plot 123, Kudu Road Kabulonga

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