Frequently Asked Questions on Zambia

Last Updated: July 13, 2023

Read answers to key questions regarding Zambia and the IMF

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What are the goals of Zambia’s Extended Credit Facility (ECF) program?

The 38-month, $1.3 billion ECF-supported program is based on the Zambian authorities’ homegrown economic reform plan. It aims to restore macroeconomic stability and foster higher, more resilient, and more inclusive growth by addressing Zambia’s most pressing macroeconomic challenges, namely:

  • restoring sustainability through fiscal adjustment and debt restructuring;
  • creating room in the budget for much-needed social spending; and
  • strengthening governance and reducing the risk of corruption, including by improving public financial management.

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How will the program protect society’s most vulnerable? Will the delivery of key social programs like free education be impacted?

A key objective of the authorities’ reform program, supported by the IMF, is to gradually increase the level and improve the quality of social spending to reduce poverty and inequality, as well as to improve access to basic social services, especially in rural areas.

Spending on social protection is projected to more than double from 0.7 percent of GDP in 2020 to 1.5 percent by 2025. With World Bank support, the number of beneficiaries of the social cash transfer program has increased to above one million, and the amount of cash benefits received by each beneficiary doubled in 2023. Other social protection programs are also being expanded, including programs to mitigate food insecurity, keep girls in school, and help provide meals for students.

The Fund-supported program also accommodates the much-needed increase in spending in education and health, including extending free education to all and hiring over 41,000 additional health and education workers.

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How will the program promote transparency and help fight corruption?

Strengthening governance and fighting corruption are critical to attracting investment and generating growth. The authorities have emphasized a zero-tolerance approach to corruption. At their request, a comprehensive IMF-staff supported governance diagnostic assessment was published in December 2022 to identify the main governance weaknesses and risks of corruption, as well as specific measures to address them. The government is committed to implementing the report‘s recommendations.

At the same time, with support from the Fund, the authorities are strengthening accountability and transparency, particularly around the use of public resources. This includes a new debt management bill, new public procurement regulations, strengthened commitment controls of budget resources, and additional transparency requirements around the country’s agricultural input subsidy program.

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What is the status of the debt restructuring process?

On June 22, 2023, the Zambian authorities reached an agreement with the Official Creditor Committee (OCC) on a debt treatment that is in line with Fund program parameters. This agreement provided sufficient financing assurances to move forward with the Executive Board’s first review of Zambia’s ECF arrangement.

The authorities now need to seek agreements with their private creditors, including Eurobond holders, and other official creditors not represented by the OCC on comparable terms.

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What are the details of the debt restructuring deal agreed on June 22?

The Minister of Finance delivered a statement to Parliament on June 29, which gives a good overview of the debt restructuring deal.

In brief, the debt treatment, together with an assumed treatment of private creditors on comparable terms will meet the IMF supported program parameters. It will reduce external debt servicing to 14 percent of revenues by 2025 and the present value of external debt to 84 percent of exports by 2027.

The deal covers the debt held by members of the official creditors committee and:

  • Extends the maturity of the debt by more than twelve years, with a final maturity in the year 2043.
  • Reduces the interest rate due on the claims. During the program, only a small amount of interest will be paid.
  • The agreement is unique in that it specifies both a baseline and a contingent treatment that would be automatically triggered if the assessment of Zambia’s economic performance and policies improves.
  • The trigger will be linked to the assessment of Zambia’s debt-carrying capacity as assessed around the end of the program and in line with the IMF-World Bank Debt Sustainability Framework for low-income countries. The revised treatment for official creditors would entail some acceleration of principal payments and higher interest payments. Again, the treatment has been calibrated to protect Zambia’s debt sustainability.

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How much debt will be subject to the OCC treatment? Didn’t the IMF report that Zambia had $8 billion in official bilateral debt in its staff report of Sept 6, 2022?

Official creditors have confirmed that $6.3 billion of Zambia’s external debt will be covered by the treatment agreed with the OCC. This is less than the $8 billion in official bilateral debt initially indicated reflecting the OCC’s confirmation that some claims will be treated as private sector claims under the OCC treatment.

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Will domestic debt be restructured?

Official creditors have accepted the position of the Zambian authorities that to preserve domestic financial stability, non-resident holdings of local currency bonds and Treasury bills will not be subject to a restructuring.