The World bank and the International Monetary Fund (IMF) have congratulated Zambia for reaching an agreement with the bond holders to restructure over the 3 billion United States Dollars under the Common Framework.
Zambia has agreed to restructure $3 billion in Eurobonds, clearing a debt burden that had delayed for over three-years thereby affecting the country’s economic growth.
World Bank Country Manager, Achim Fock, says the agreement is a positive move towards stimulating the country’s economic growth, which will attract more investments in the country.
Speaking during a public forum on Zambia’ s debt restructuring process in Lusaka today,Dr Fock said the World Bank has been an advocate and supporter of the debt restructuring under the Common Framework which brings together all official creditors for better coordination.
He called for concerted efforts from all stakeholders involved, including international institutions like the World Bank and the IMF, in order to reduce complexities, informational asymmetries and more time-consuming uncoordinated discussion to ensure that countries get relief.
“I wish to congratulate the Government of Zambia and its creditors for their firm commitment and effort in reshaping Zambia’s debt under the Common Framework. These are huge steps forward and success for Zambia and its creditors, and for all highly indebted countries and the World. We also now look forward to agreement between Zambia and its other private creditors and we would like to encourage all stakeholders to accelerate the negotiations”.
Dr Fock explained that the debt restructuring agreements is a critical step for the rebuilding of trust and reduction of risk, hence ensuring macro stability and investments that can stimulate economic growth.
He noted that this is because it will allow the country to service the debt while still having fiscal space to service other important social sectors, and making government manage its public finances better
“We are pleased that the Government is committed to these objectives and we are pleased to support them with analytics and advice. But ultimately prosperity and poverty reduction require more private sector investments and growth with more and better jobs and we are pleased to also support the necessary reforms and investments” he stated.
He further pledged the World Bank’s commitment to assist Zambia to better the lives of people even during the period of debt distress and beyond, noting that from July 2023 all new World Bank financing to Zambia are provided as grants and we have already committed a total of US$647 million in grants since then.
And IMF Resident Representative, Eric Lautier, said it is encouraging to see Zambia putting up economic recovery reforms resulting in consolidated fiscal management despite the challenging environment.
Mr Lautier noted that the IMF is interested to support efforts that are consistent with debt sustainability, hence is pleased that Zambia is moving towards achieving that.
“We wish to commend Zambia through the Minister of Finance for this achievement, it’s not easy but calls for continuous engagements with various stakeholders that are key in ensuring that the country attains that much needed debt sustainability through effective restructuring.
He pointed out that there is now a need for the country to consider engaging and sign bilateral agreements with other creditors to ensure that the remaining debt is also restructured for the benefit of the citizens.
Mr Lautier also advised the government to ensure that there is transparency, accountability in the utilisation of the public as a way of attracting and fostering a private sector led economy.
Meanwhile, Minister of Finance and National Planning Situmbeko Musokotwane disclosed that so far the country has managed to restructure 75 percent (%) of its debt owed with official creditors and bondholders.
Dr Musokotwane said the government is currently engaging the other bilateral creditors to restructure the remaining 25 % debt, in order for the country to effectively reach its desired debt sustainability.
“If we do not restructure this debt, 70 % of the national budget was going to go towards paying or dismantling this debt mountain, by now we have failed even to pay salaries for civil servants, we would have failed even to pay for school fees including providing for CDF,that’s why we are already working on engaging the other creditors so that we fully sustain our debt,” he stated.
Secretary to the Treasury Felix Nkulukusa, disclosed that the country has already been given a 840 million United States dollar haircut by the bondholders with an extension of payment period of 10 years.
