IMF signs off on $1.3bn package for Zambia

The executive board of the International Monetary Fund has approved a $1.3 billion funding package for Zambia, offering a major boost to the troubled African economy.

Zambia has been dealing with the legacy of “years of economic mismanagement”, IMF directors said in a statement on August 31. “Growth has been too low to reduce rates of poverty, inequality, and malnutrition that are amongst the highest in the world. Zambia is in debt distress and needs a deep and comprehensive debt treatment to place public debt on a sustainable path.”

The programme largely focuses on repairing the government’s finances while cushioning the blow to the poorest members of society. The IMF said the reform package should unlock funding from other multilateral donors as well.

The fund urged the Bank of Zambia to rebuild its foreign exchange reserves “as conditions allow”, leaving the exchange rate to fluctuate in line with economic conditions. Zambia had reserves totalling $2.8 billion in 2021, including gold, World Bank figures show.

The IMF said the central bank also needed to deal with “high” levels of non-performing loans and ensure commercial banks build up capital buffers.

Zambia was one of the first countries to default on its debt in the wake of the Covid-19 crisis, as authorities struggled to finance health measures during the economic shock.