Zambia is poised to sign a Memorandum of Understanding (MoU) on its debt restructuring with official creditors next week, according to Finance Minister Situmbeko Musokotwane.
The MoU is a key step to securing the next tranche of funding from the International Monetary Fund (IMF). Zambia clinched an agreement in June to restructure $6.3 billion in debt owed to governments abroad, including China and members of the Paris Club of creditor nations. To formalize the debt deal, Zambia has to sign the MoU with the official creditors.
“An agreement on an MoU is nearly finalized and the signing is expected soon,” Musokotwane told Solwezi Today in Marrakech, Morocco.
The signing of the MoU is a positive development for Zambia, as it will help to reduce its debt burden and pave the way for further economic growth. Zambia was the first African country to default on its debt during the COVID-19 pandemic, and the debt restructuring process has been closely watched by other African countries facing similar challenges.
The IMF has said that the debt restructuring deal is “a significant step towards restoring Zambia’s long-term debt sustainability.” The IMF is expected to provide Zambia with a $1.3 billion loan under its Extended Credit Facility (ECF) program, which is designed to support countries with protracted balance of payments problems.
The signing of the MoU is also expected to unlock additional financing from other lenders, including the World Bank and the African Development Bank. This financing will be crucial for Zambia’s economic recovery, which is expected to be slow and bumpy.
The Zambian government is hoping to achieve economic growth of 3.5% in 2023, up from 2.8% in 2022. However, the IMF has warned that the outlook for the Zambian economy is “subject to significant downside risks,” including the ongoing global economic slowdown and the impact of the war in Ukraine.
Despite the challenges, the signing of the debt restructuring MoU is a significant step forward for Zambia. It is a sign that the country is committed to its economic recovery and is willing to make the necessary reforms to achieve it.