• Zambia’s ultimate solution does not end at acquiring the US$1.3 billion from the IMF.
• The country still needs to restructure the debt for it to have sustainable debt level.
• The country still needs support from other cooperating partners and lenders on more concessional terms.
An Economist says the US$1.3 billion Extended Credit Facility (ECF) that Zambia got from International Monetary Fund (IMF) is not the ultimate solution to all economic problems the country is currently facing.
Speaking in an interview with Money FM News, Emmanuel Zulu however said the bailout package is what Zambia needed to resolve its debt crisis, as the country’s sovereign debt had hit the highest of US$31 billion as at September 2021.
Mr. Zulu noted that Zambia was the first country to default on a sovereign debt post Covid-19 in 2020 and the situation led to a big drop in the country’s credit ratings, making it very hard to win confidence.
He further said if the country had to service the debt from the locally collected resources, the budget would literally be empty for other services such as education, health, social protection and would not have seen any investment for growth.
“To either support or not support the route taken by the Government, you will be doing a very big dis-service to the country if you close your eyes to the reasons that led the Government to seek the IMF ECF. First of all, it’s the ballooned sovereign debt that had hit the highest of US$31 billion as at September 2021 why we are here.”
“We were the first country to default on a sovereign debt post Covid19 in 2020 and that led to big drop in our credit ratings making it very hard to win confidence even on the commercial market. Did we get the ultimate solution for all our economic problems? No, but we definitely made a step in the right direction,” Mr. Zulu said.
Mr. Zulu added that there was no immediate solution to bring about macroeconomic stability and fiscal space to Government without accessing relief from the IMF, as no institution was ready to give the country US$1.3 billion on a concessional basis and at the same time facilitate for the debt restructuring process.
“As a country we had no capacity to repay the debts we owed. Prior to this, we hired Lazard Freres and paid US$5 million so that they can negotiate for us with our creditors for a possible restructuring but due to the complexity of our debt, they failed. This situation we slightly experienced when growth slumped into -2.8, inflation at 22%, Foreign Exchange was at K22 for a dollar.”
“However, the Ultimate Solution does not end at us acquiring the US$1.3 billion from the IMF. The country still needs to restructure the debt for it to have sustainable debt level which should be far below 100% ratio to the GDP if we are to fully appreciate the whole process. The country still needs support from other cooperating partners and lenders on more concessional terms,” he added.