The World Bank has approved a $275 million development policy operation for Zambia in support of the country’s reforms to restore fiscal and debt sustainability and promote private sector-led growth. The operation is an integral part of IDA’s substantial contribution to help Zambia recover from the COVID-19 pandemic and spillovers from the war in Ukraine, emerge from its debt crisis, and to shift to a more sustainable and inclusive growth.
Zambia is in debt distress and needs a deep and comprehensive debt treatment to place public debt on a sustainable path. In January 2021, the government requested support under the G20 Common Framework for Debt Treatments and launched fiscal and structural reforms to restore macroeconomic stability and reinvigorate growth. The government has prioritized commitment to fiscal discipline, improved public financial management, and greater transparency, including in debt management and reporting. Other structural reforms have focused on removing market distortions, improving transparency, and fighting corruption.
“Restoring macroeconomic stability and debt sustainability are necessary for attracting private sector capital inflows, investment, and growth,” said World Bank Group President David Malpass. “As Zambia seeks debt relief under the G20 Common Framework, I urge official bilateral and private sector creditors to agree promptly on a deep debt reduction that is consistent with the joint WBG-IMF debt sustainability analysis and brings public debt to sustainable levels. Faster growth and private sector investment depend on prompt completion of debt reduction.”
The operation supports government’s policy and institutional reforms aimed at: 1) restoring fiscal and long-term debt sustainability, 2) increasing farmer productivity and access to agricultural markets, 3) ensuring sustainable access to energy, and 4) enhancing access to finance and private sector development. Financing for this operation is provided by the World Bank’s International Development Association (IDA)*.
The operation is part of coordinated support with Zambia’s development partners to promote critical structural reforms. Continued support by development partners is needed as Zambia is pursuing appropriate economic policies and making good faith efforts to reach a collaborative agreement on debt treatment with its official bilateral and private sector creditors.
This is according to a press release number 2022/020/AFE issued by the world bank on 25th October, 2022, Washington DC.