The International Monetary Fund (IMF) On Wednesday granted a loan of $1.3bn (£1.1bn) loan to Zambia under a 38-month loan program, reported The Bloomberg.
In a statement, the IMF said the approval of the Extended Credit Facility program will result in the immediate disbursement of about $185 million to the southern African country that will use the fund to restructure its debts and rebuild an economy ravaged by mismanagement and COVID-19.
As per the statement, the new credit facility arrangement would provide total funding of 978.2 million Special Drawing Rights that is equivalent to 100% of Zambia’s Fund quota, or shareholding.
In July, Zambia’s creditors led by China and France agreed 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.”
The funding will likely be used to restore Zambia’s macroeconomic stability through fiscal adjustment and debt restructuring and strengthening economic governance.
Georgieva said the economic restructuring would require sustained spending reductions and that Zambian authorities were appropriately focused on eliminating regressive fuel subsidies, reforming agricultural subsidies, reducing inefficient public investments and increasing tax revenues. She said the measures will free up some fiscal space to increase social spending to ease transition burdens on the most vulnerable.
The IMF said the loan also will catalyze much-needed financial support from development partners and donor countries.
Zambian Finance Minister Situmbeko Musokotwane welcomed the program.
“This demonstrates the confidence that the international community has in Zambia’s ability to turn the page from unsustainable debt to prosperity and growth. To the public and our creditors, we will not disappoint,” the minister said.
