Updated: IMF Staff Reaches Staff-Level Agreement on an Extended Credit Facility Arrangement with Zambia
IMF News, December 6, 2021
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- Updated: IMF Staff Reaches Staff-Level Agreement on an Extended Credit Facility Arrangement with Zambia
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- Published: December 6, 2021
Agreement overview
- An IMF team reached a staff-level agreement with the Zambian authorities on a new arrangement under the Extended Credit Facility (ECF) for 2022-2025.
- The arrangement is in the amount of about SDR 980 million or $1.4 billion.
- The staff-level agreement is subject to IMF Management and Executive Board approval and receipt of the necessary financing assurances.
- Consideration by the IMF Executive Board is subject to progress on comprehensive debt treatment under the G20 Common Framework.
Mission and statement
- Mission led by Ms. Allison Holland, Mission Chief for Zambia, conducted a virtual mission during November 4 – Dec 2, 2021.
- The statement reflects preliminary staff findings; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
Program objectives
- The economic program aims to:
- restore macroeconomic stability;
- foster higher, more resilient, and inclusive growth;
- provide the foundation for an inclusive economic recovery.
- The government’s reform program seeks to:
- restore fiscal and debt sustainability;
- create fiscal space for much needed social spending;
- strengthen economic governance and transparency.
Fiscal policy and public finance management reforms
- The authorities committed to an ambitious reform program to address severe economic and social challenges and remedy past weaknesses in economic governance and public financial management that led to an unsustainable debt overhang.
- Key elements include:
- a large, upfront fiscal adjustment with an important shift in spending away from inefficient public investment and poorly targeted subsidies towards greater investment in health and education and the delivery of more social benefits;
- an ambitious medium-term agenda to enhance revenue mobilization through policy changes and administrative changes;
- tighter spending controls and determined implementation of public procurement rules and regulations to ensure value for money and transparent use of public resources;
- measures to restore budget credibility, improve the efficiency of public expenditures, and halt the accumulation of arrears, thereby supporting private sector-led growth;
- key legislative reforms, including the planned revision of the Loans and Guarantees Act, to increase public oversight and help address past weaknesses in debt accumulation;
- a comprehensive governance assessment to support efforts to strengthen governance and reduce corruption (to be undertaken with IMF staff support).
Debt treatment and G20 Common Framework
- In light of unsustainable public debt, the authorities’ reform efforts need to be supported by a comprehensive debt restructuring.
- The authorities requested a debt treatment under the G20 Common Framework.
- The IMF welcomes this request and hopes official creditors can quickly form a committee and provide financing assurances.
- IMF staff support the authorities’ constructive engagement with private creditors to help secure a deal on comparable terms to official creditors.
- Sufficient progress on debt treatment and financing assurances is required before the staff-level agreement can be presented to the IMF Executive Board for approval.
Monetary and financial sector measures
- Safeguarding central bank autonomy, and monetary and financial stability remains a priority.
- The Bank of Zambia will continue strengthening its monetary policy framework and financial sector supervisory capacity.
- A revision of the Bank of Zambia Act is planned, including to ensure its operational independence.
- The authorities’ reform program should support a return to price stability over the medium term.
Stakeholder engagement and acknowledgements
- IMF staff held meetings with Finance Minister Situmbeko Musokotwane, Bank of Zambia Governor Denny Kalyalya, and senior government and Bank of Zambia officials.
- IMF staff expressed gratitude to the Zambian authorities for their open, committed and constructive engagement.
Press Release No. 21/359 — Updated: IMF Staff Reaches Staff-Level Agreement on an Extended Credit Facility Arrangement with Zambia — December 6, 2021