Zambia’s finance minister asked the International Monetary Fund to release about $188 million to the southern African nation even if its creditors aren’t able to reach agreement on how to deal with the nation’s debt.
(Bloomberg) — Zambia’s finance minister asked the International Monetary Fund to release about $188 million to the southern African nation even if its creditors aren’t able to reach agreement on how to deal with the nation’s debt.
“What will be the point of punishing a country that is performing,” Situmbeko Musokotwane said in an interview on Bloomberg Television Tuesday when asked what happens if a restructuring deal faces continued delays. “Zambia has performed according to the program, so it must not be punished. It must be rewarded.”
The finance chief spoke in in Washington, where he is meeting with IMF executive directors during the organization’s Spring Meetings “to appeal to them” for a solution. The second disbursement from the IMF was scheduled to be available on April 1, according to the program deal reached last year.
“Let’s work together to make sure that the debt is resolved,” he said. “Given the possibility that the MOU is not signed, Zambia should not be punished.”
Zambia was the first African nation to default and seek restructuring after the start of the Covid-19 pandemic, and has become a crucial test case for a new global mechanism to rework poor countries’ debts, while the list of governments unable to afford servicing them keeps growing.
The mechanism — known as the Common Framework and introduced by the Group of 20 forum — has faced repeated roadblocks, and an April 12 meeting convened by the IMF, World Bank and current G-20 chair India will to try to reach greater consensus on how to deal with debt.
Relief Pursuit
While Musokotwane said the level of engagement with creditors “has intensified in the past few weeks,” a deal remains elusive. Earlier this month, the IMF provided a fresh impetus for an agreement by saying it can’t approve a $188 million payment to Zambia until the official creditors agree to provide relief.
“I would not rest until they do,” IMF Managing Director Kristalina Georgieva said in an interview in Washington last week. “I’m going to pursue the creditors until they deliver.”
Zambia’s official creditors committee, which China and France co-chair, will meet again next week and World Bank President David Malpass raised the possibility that they may strike a restructuring deal. A meeting between the US and Chinese ambassadors to Zambia in the capital Lusaka this month also raised hopes.
When asked if creditors might finally agree on relief next week, Musokotwane said “we are hoping so. There have been lots of sideline meetings.”
He added: “We are certainly hoping there could be a breakthrough.”
Local-currency government debt won’t be considered for restructuring, Musokotwane said. Zambia’s kwacha has been sliding in part because foreign investors have shunned local-currency debt auctions for fear of the notes being restructured, according to the central bank.
–With assistance from Romaine Bostick.
(Updates with comment from Musokotwane in seventh paragraph.)
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