Zambia, which had previously signed a preliminary agreement in June to restructure a portion of its debt, is now on the verge of finalizing a memorandum of understanding with its creditors, though it has not yet been fully completed, according to an IMF spokesperson on Thursday.
The spokesperson for the IMF stated, “An agreement on the memorandum of understanding is almost finalized and signing is expected soon.” It was a response to the premature announcement of the agreement’s signing made by IMF Managing Director Kristalina Georgieva.
Subsequently, a source close to the situation confirmed that the agreement had not been officially concluded, with the signature anticipated in the coming week.
In their concluding communiqué on Thursday, G7 finance ministers from the meetings in Marrakech urged for the speedy finalization of the memorandum of understanding concerning the restructuring of Zambia’s debt.
This memorandum represents the final step to validate the previously agreed-upon restructuring of $6.3 billion of external debt, which was one of the conditions set forth by the IMF in its aid program agreement with Zambia. The finalization of the memorandum is a prerequisite for the release of all disbursements.
Zambian Finance Minister Situmbeko Musokotwane expressed his gratitude to all creditors, emphasizing the challenges posed by a debt crisis situation. He also highlighted the need to focus on achieving better economic growth and job creation for young Africans, so they are no longer driven to undertake perilous journeys across the Sahara and the Mediterranean.
Zambia’s debt has grown substantially in recent years, totaling an estimated $32.8 billion, with $18.6 billion owed to foreign creditors, particularly China. Zambia was the first African country to default on its debt in 2020, a situation exacerbated by the COVID-19 pandemic.
Former Zambian President Edgar Lungu has been accused of incurring significant debt through major infrastructure projects, with China being the primary lender. The debt service, coupled with public servant salaries, has accounted for over 90% of tax collections. The aid from the debt restructuring will enable Zambia to redirect funds to support vulnerable sectors.
In August 2022, Zambia reached an agreement with the IMF for a $1.3 billion aid program and successfully completed the first program review in July 2023, confirming the implementation of the outlined reforms.