The IMF has announced that its staff have reached an agreement with the government of Zambia on a $1.4 billion loan over three years. The only information about the programme released by the IMF is that it is “based on the authorities’ plans to undertake bold and ambitious economic reforms.” The agreement is subject to approval by the IMF Board.
Reacting to the announcement, Tim Jones, Head of Policy at Jubilee Debt Campaign, said:
“This money is at risk of being used to just pay off previous reckless lenders rather than to help economic recovery in Zambia. Too often IMF loans are used to bail out lenders, while the public bear the brunt of imposed austerity. The IMF needs to demand that private and government lenders agree to significant debt cancellation to make Zambia’s debt sustainable. The IMF also needs to make clear that, if they refuse, the IMF will politically and financially support Zambia to stay in default to those lenders”
Zambia defaulted on its foreign currency bonds in November 2020. Jubilee Debt Campaign has calculated that bondholders could make up to 250% profit if the bonds were paid in full. Jubilee Debt Campaign warned back in 2015 that Zambia was at risk of a government external debt crisis, with an increasing debt payment burden and overreliance on copper exports for income from the rest of the world.
The IMF has previously said Zambia’s debt is unsustainable. The IMF is not allowed to lend where there is unsustainable debt unless a debt restructuring takes place to make the debt sustainable, or unless the borrower defaults on creditors who refuse to accept the debt restructuring.
Zambia applied for a debt restructuring through the G20 Common Framework at the start of 2021, but has had no debt restructured by either private lenders or G20 governments. Of Zambia’s external debt payments between 2021 and 2024:
- 59% are to private creditors
- 27% to China
- 8% to multilateral institutions
- 7% to other governments