Zambia’s quest to get an umbrella before the rains – IMF bailout still bleak

Zambia’s Finance Minister Dr. Bwalya Ng’andu on 12 February in his economic briefing assured the nation that his ministry was engaging the Washington based lender for a bailout package. Dr. Ng’andu preempted the International Monetary Funds (IMF) next visit to Zambia between 18-22 March a period with which a team would court the MinFin on various issues ranging from debt sustainability to overall fiscal posture.

Bailout package before 2021 Polls? Responding to a press query as to whether or not Zambia would be granted a package before the 2021 polls, the Minister categorically stated that the IMFs condition to a package was that the copper producer should attain an acceptable debt sustainability level which his team was working around the clock to attain. However analysts are of the view that it is very unlikely for a bailout from the Washington based lender before 2021 as African nations usually ramp up huge expenditures in election preparations.

“The debt sustainability level question before a bailout package is like giving us an umbrella after the rains,” Dr. Bwalya Ng’andu said.

Moratorium on infrastructure projects. The Minister in his 6 months in office has rescoped externally funded projects, implemented moratoriums on projects which are non concessionary in mature with the aim of easing the debt burden on the fiscals. Further Dr. Ng’andu’s team is talks with the legal side to asses the ramifications of cancellation of any lines contracted but not drawn.

Article IV mission versus actual bailout discussions. The Kwacha Arbitrageur is however of the view that a good signal for progress would be appointment of the resident representative in the Zambia office as a gigantic step towards any fruitful discussions. Furthermore most players struggle to distinguish between IMF Article IV Mission team visits and bailout package discussions which are interlinked but different.

Africa’s red metal hotspot has been perusing an IMF bailout package for over 2.5 years with little fruition which has made investors weary and at some point bred asset sell off pressure. The fiscal head said however that his team would conduct frequent debt sustainability exercises which they would communicate to the IMF team as discussions progress.

The MinFin economic brief was the second brief Dr. Ng’andu gave after clocking exactly half a year in office.

As at close of business Zambia dollar bond yields were 20.42% for 2022, 19.06% for 2024 and 16.63% for 2027.

The Kwacha Arbitrageur