The head of the International Monetary Fund is praising Zambia’s efforts to reform its economy and urging its creditors to restructure the country’s debts. Zambia was the first African country to default on its sovereign debt in the COVID era. Economists say prompt debt restructuring is needed to restart Zambia’s stagnant economy.
Speaking at the University of Zambia Tuesday, IMF managing director Kristalina Georgieva applauded Lusaka’s efforts to reform its economy, saying it had done its part and urging its creditors to do theirs.
She said the IMF had reached an understanding in principle with China to restructure almost $6 billion Zambia owes Beijing, one of its main creditors.
The IMF chief acknowledged global disruptions that shook Zambia’s economy.
“Over the last years, we have experienced two unthinkable events: First COVID, that brought the world economy to a standstill for a prolonged period of time. Second, the invasion by Russia of Ukraine,” said Georgieva.
Russia’s invasion of Ukraine in February last year disrupted food, energy, and other markets as western governments hit Moscow with sanctions and Russia’s navy stopped Ukraine’s grain exports.
Zambia defaulted on its debt in November 2020, the first African country to do so after the COVID pandemic.
But Lusaka’s debt problem predates the pandemic.
The government under former President Edgar Lungu from 2015 more than doubled Zambia’s debt as a percentage of GDP, according to World Bank-collected data.
An IMF study released this month says corruption flourished under Lungu’s government, which his former ruling party rejects.
Current President Hakainde Hichilema, who was elected in 2021, pledged to tackle corruption and secured $1.3 billion in IMF support for Zambia’s debt with reforms that cut wasteful spending.
Civil Society Debt Alliance economist Boyd Muleya said creditors’ delay in negotiating Zambia’s debt is slowing its economic recovery.
“So, the challenge that Zambia faces today mostly is the protracted nature of the debt restructuring process that we have seen and the challenge that further augments this conversation is the fact that there are no timelines that are set and so it creates a lot of uncertainties in terms of economic planning going forward,” said Muleya.
IMF director Georgieva met late Monday with President Hichilema and vowed to help resolve the impasse with creditors.
The Economics Association of Zambia’s Trevor Simumba said reaching a final deal on Zambia’s debt would also help the IMF reverse negative views in Africa on its strict policies.
“As you are aware the economy is stagnant, it’s not growing at a pace that’s required to grow in order to deal with the structural problems. Simply by the textbook theories of the IMF in terms of the usual - we need to rein in inflation, we need to make sure that the exchange rate is stable, doesn’t depreciate, these things in reality don’t work,” he said.
Zambia says its foreign debt hit $17 billion last June as prices for copper, one of its key exports, crashed.
Zambia is Africa’s second largest producer of the valuable metal after the Democratic Republic of Congo.
