Zambia sees latest IMF review sealed in June with funding boost

Zambia expects to conclude its third program review with the International Monetary Fund next month, as the copper-rich nation finalises $500 million of international assistance to deal with the effects of a record drought.

The southern African nation has faced delays in getting IMF board approval for its next portion of funding — worth more than $180 million — mainly because of the need to formulate a plan to cover the financing gap caused by the weather shock, Secretary to the Treasury Felix Nkulukusa said.

Hakainde Hichilema, Zambia’s President

Zambian President Hakainde Hichilema last month appealed to donors to help plug a budget shortfall of about $900 million due to the worst drought in four decades that’s destroyed most of the nation’s staple corn crop before harvest. The lack of rain also impacted hydropower dams that supply about 85% of Zambia’s electricity, prompting the government to cut energy to households by on average 12 hours a day.

Funding pledges

The government has since received indicative pledges totaling about $500 million from bilateral and multilateral partners to help with the drought, Nkulukusa said in an interview Monday, declining to identify them as some were still seeking internal approval.

“We are very sure that we’ll be able to conclude” the IMF discussions and be able to go to the board in June, Nkulukusa said.

Zambia has held productive talks with the Washington-based lender, he said.

“We are looking at the possibility of supporting Zambia to deal with impact of the weather shock,” Eric Lautier, the IMF’s resident representative, said in response to emailed questions. “We are continuing discussions with the authorities and hope to reach a staff level agreement by the end of the week.”

The deal would bring Zambia a step closer to board approval needed to support its efforts to restructure about $13.4 billion of external debt, as the years-long process nears an end.

Africa’s first sovereign pandemic-era defaulter has so far finalized reworking $6.3 billion in bilateral debt and aims to conclude a near-$4 billion bond revamp deal in early June.

It’s also in talks to overhaul about $3.3 billion of loans owed to other commercial creditors — the bulk of which are state-owned Chinese lenders. It’s been engaging them individually — as they haven’t set up a committee — and is working to address their concerns, said Nkulukusa. While talks are advanced with the big state-owned Chinese creditors, some of the other lenders have raised questions about whether their debt should be overhauled, he said, without identifying them.

“There are others that are saying that they are not supposed to be part of the restructuring,” Nkulukusa said. “We have to explain why they should be part and what does it mean if they’re not there.”