The Washington-based lender’s staff reached a deal with the
government on the third review of an existing $1.3 billion economic program, as
well as a request to augment it to about $1.7 billion, the IMF said in an
emailed statement Tuesday. The nation will have immediate access to about $573
million as soon as the emergency lender’s management and board approve the
agreement, with a meeting due by the end of June.
The copper-rich nation, which became Africa’s first
pandemic-era sovereign debt defaulter in 2020, faced delays in completing the
review as it worked out how to fill a funding gap caused by the drought, which
has hammered its harvest and vital hydroelectric production.
Fallout from the El Niño-induced dry spell prompted the
southern African nation to slash its 2024 economic growth forecast by half to
2.5% and appeal for help in closing a $900 million budget shortfall it had
caused. The Finance Ministry had already received indicative pledges of support
totaling about $500 million from co-operating partners to help deal with the
impact.
The IMF funds will help support the government as it seeks
to conclude a years-long restructuring of about $13.4 billion of external debt.
Holders of Zambia’s $3 billion in outstanding eurobonds were due to meet
Tuesday to approve exchanging their debt for new notes. They’d already given
early voting instructions, with investors holding more than 92% of the bonds in
favor the restructuring.
Other key points from the IMF statement:
The fund sees farming output shrinking by 19%, with copper
production expected to recover more gradually than initially envisaged
Zambia’s revised 2024 budget will provide emergency relief
for an extra one-million households, and additional external funding will help
temporarily expand social cash transfers
Monetary policy will need to remain appropriately tight,
while allowing the exchange rate to play its role as a shock absorber