Thursday, 22nd June, 2023 – The Government of the Republic of Zambia is pleased to announce that it has reached an agreement on a comprehensive debt treatment with its Official Creditors under the G20 Common Framework. This landmark achievement is a significant step towards restoring Zambia’s long-term debt sustainability. It complements the strong commitments from Zambia’s Multilateral Development Partners to support the country’s economic recovery through substantial concessional financing.
The Zambian Government commends the support and cooperation of its Official Creditors in reaching this agreement, which demonstrates a mutual commitment to restoring debt sustainability in line with the International Monetary Fund (IMF) program targets. The Government is confident that this debt treatment, which entails significant maturity extensions and reduction in interest rates, will allow for the allocation of additional financial resources towards critical public investments, particularly in areas such as healthcare, education, and infrastructure development.
Under the agreed terms, the Official Creditors will provide a debt treatment contingent on Zambia’s debt-carrying capacity at the end of the Fund-supported program. This will be assessed under the IMF and World Bank Debt Sustainability Framework for Low Income Countries and will take account of the country’s economic performance and progress in strengthening economic policymaking. The agreed debt treatment will be adjusted if conditions improve enough to justify an upgrade from “weak” to “medium” debt carrying capacity, in which case principal reimbursements would be accelerated and interest payments increased. This debt treatment ensures that Zambia achieves debt sustainability in all cases. Official creditors have also agreed with the Government that local currency denominated debt will be excluded from any treatment.
The terms of the agreed treatment will be further described and formalized in a Memorandum of Understanding between Zambia and Official Creditors, which will then be implemented through bilateral agreements with each member of the Official Creditor Committee. The Zambian Government looks forward to engaging with Official Creditors to ensure prompt implementation of the agreed terms.
The agreement is expected to pave the way for the approval by the IMF Executive Board of the first review of the Fund-supported program in the coming weeks, allowing for the next tranche of IMF financing of about US$188 million to be disbursed. This disbursement will further bolster Zambia’s economic recovery and reform agenda. It should also support ongoing engagement with private creditors, including bondholders, with whom Zambia remains committed to finding an agreement on comparable terms as early as possible, to decisively resolve the issue of Zambia’s debt overhang.
The Minister of Finance and National Planning Dr Situmbeko Musokotwane issues the following statement:
“Today is a big day for Zambia as we reach an agreement with our official creditors on a debt treatment plan. We are grateful for the support from our official creditors in resolving Zambia’s debt overhang that has been choking our economy. This agreement marks a crucial milestone in Zambia’s ongoing efforts to strengthen its economy and improve the quality of life for its citizens. We will now work to achieve a swift resolution with our private creditors and deliver opportunity and economic stability to the Zambian people.”
(Original Copy Signed)
The Secretary to the Treasury
MINISTRY OF FINANCE AND NATIONAL PLANNING
NOTE: Lazard Freres and White and Case LLP acted respectively as financial and legal advisors to the Government of The Republicof Zambia.