Africa’s second largest copper producer, Zambia continues to make strides towards closing a deal with the Washington based lender, the International Monetary Fund – IMF for an Extended Credit Facility – ECF. Conclusion of a bailout deal will serve as a precursor for successful debt restructure which creditors have demanded. Zambia is in the labyrinth of a debt restructure process by Lazard Frere’s the French Investment Banking entity. The copper producer was the first nation to default in COVID era following amplified pandemic effects that has seen record resource allocation towards healthcare at the expense of productive sectors of the economy, a systematic scenario across the globe. Grappling with exchange rate depreciation, inflation spiral and a 2.9% (World Bank) recession in previous year, Zambia’s balance sheet vulnerabilities have persisted with the copper producer defaulting on four coupon payments on its dollar bonds to date. With a few days to parliament dissolution on May 14, it is becoming clearer that chances of inking an ECF before the August polls are very lean.
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“The IMF mission has continued discussions with the authorities during April-May on their request for an Extended Credit Facility (ECF). Building on the earlier discussions in February-March, there was broad agreement on the macroeconomic framework. Notable progress was made in detailing the key policy measures to address the macroeconomic imbalances currently facing Zambia and to enable a return to sustained growth with enhanced fiscal space for social and development spending. The Zambian authorities reaffirmed their continued commitment to reforms. We look forward to continuing ECF discussions as key measures are taken,” The Washington based lender carried website.
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“We thank the IMF for the productive engagement and look forward to continuing discussions on the policy package implementation to ensure Zambia’s return to growth and debt sustainability. The reform path is clear. We are committed to securing an IMF programme which would support Zambia’s structural reform efforts to strengthen our response to the shocks caused by the COVID19 pandemic and to ensure a solid foundation for a prompt and inclusive economic recovery,” Zambia’s Finance Minister Dr. Bwalya Ng’andu said.
Zambia’s outlook as measured by the recent copper price frenzy remains positive as this will provide the red metal producer an opportunity to increase its tax revenue earnings which will assist with narrowing its budget deficit and absorption of debt obligations. The Southern African nation will seek to leverage off a mining boom to claw back growth eroded by the COVID19 pandemic.
The Kwacha Arbitrageur