By BUUMBA CHIMBULU
THE announced US$1.4 billion staff-level agreement with the International Monetary Fund (IMF) allows progress to be made on debt restructuring negotiations with Zambia’s creditors.
Zambia and the IMF this week reached a staff-level agreement for a US$1.4 billion, three-year Extended Credit Facility programme.
With the IMF on board, the creditors would be a lot more amenable to negotiating in good faith, according to the Zambia Instiute of Policy Analysis and Research (ZIPAR).
ZIPAR in its analysis on IMF staff level agreement with Zambia stated that debt restructuring was particularly important since, at present, over 110 percent of domestic revenue in the 2022 national budget would go towards debt financing and servicing the public wage bill alone.
“Perhaps the most important benefit of securing the IMF staff-level agreement is the bargaining chip this gives the government going into debt restructuring negotiations, given that external debt stood at 117 percent of Gross Domestic Product as at end-2020,” ZIPAR stated.
ZIPAR indicated that other doors that the IMF deal would open included impetus for fiscal discipline, fiscal space for social sector spending, and an overall confidence boost in the Zambian economy.
It emphasised that reaching a staff-level agreement with the IMF was therefore a considerable step in the right direction for restoring macroeconomic stability.
Going forward, ZIPAR indicated, fiscal discipline would also be essential to keeping the economy on an even keel and ultimately achieving economic recovery and growth.
It indicated that the fiscal space to be created by IMF finance would also allow more room for social sector and other essential spending.
ZIPAR emphasised that the biggest boost to the economy, however, would probably come from the renewed confidence in Zambia’s economic prospects for both investors and cooperating partners.
“With further details on the agreement yet to be released, this staff-level agreement is an achievement that many stakeholders have been waiting for.
“As further details of the agreement begin to emerge, watch this space for a more detailed look at what an IMF deal for Zambia could unlock,” ZIPAR stated.
Over the years, ZIPAR has advocated for an IMF programme through working papers, policy briefs as well as articles.
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