IMF approves N$22 billion loan to Zambia
The International Monetary Fund (IMF), has approved the extension of a N$22billion (US$1,3billion) credit facility to Zambia. This will help to restore macroeconomic stability and foster better inclusive growth.
This new extended credit facility (ECF), which is equivalent to 978,2 millions special drawing rights, will help the authorities to implement their domestic reform plan to restore debt sustainability, create fiscal room for much-needed social spending and strengthen economic governance.
The fund states that it is essential to secure timely restructuring agreements with creditors outside of the ECF arrangement’s implementation.
This N$22 billion amount is equivalent to 100% their special drawing rights.
Currently, Zambia is suffering from the effects of years of economic mismanagement and an inefficient public investment drive.
The rate of poverty, inequality and malnutrition, which are among the highest in the globe, has been too low for growth to reduce them.
Zambia is in serious debt distress and requires a thorough and comprehensive debt treatment in order to put its public debt on a viable path.
The ECF-supported programme will assist in reestablishing sustainability through fiscal adjustment or debt restructuring, create fiscal room for social spending to offset the burden of adjustment, strengthen economic governance, and improve public financial management.
Kristalina Georgieva (IMF managing director) says that Zambia faces deep challenges, reflected in high poverty and low growth. The ECF-supported programme seeks to restore macroeconomic stability, foster better, more resilient, and more inclusive growth.
She said that to restore fiscal sustainability, it will take sustained fiscal adjustment.
“The authorities’ adjustment plans appropriately focus on eliminating regressive fuel subsidies, enhancing the efficiency of the agricultural subsidy programme, and reducing inefficient public investment,” Georgieva says.
This means that the country will eliminate fuel subsidies and implement fiscal consolidation on investments.
The director stated that domestic revenue mobilisation must also be supported by medium-term adjustment.
“The adjustment creates fiscal space for increased social spending to cushion the burden on the most vulnerable, help reduce poverty, and to invest in Zambia’s people. We are especially pleased by the ongoing expansion of the social cash transfer program and their plans for increasing public spending on education, health and welfare.
“Together with the fiscal adjustment, Zambia needs a deep and comprehensive debt treatment under the G20 Common Framework to restore debt sustainability,” Georgieva says.
President Hakainde Hachilema of Zambia has stated that the extended credit facility programme will take place over 38 months. It includes economic and financial policies that are anchored on the development outcomes of the country’s eighth development plan.
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