IMF Government Board Approves New Prolonged Credit score Facility (ECF) Association for Zambia

August 31, 2022

• The IMF Board approves SDR 978.2 million (about US$1.three billion) 38-month ECF association for Zambia to assist restore macroeconomic stability and foster greater, extra resilient, and extra inclusive development.
• The authorities’ program, supported by the ECF-arrangement, will advance the authorities’ homegrown reform plan to revive debt sustainability, create fiscal area for much-needed social spending, and strengthen financial governance.
• Securing well timed restructuring agreements with exterior collectors might be important for the profitable implementation of the brand new ECF association.

Washington, DC:
The Government Board of the Worldwide Financial Fund (IMF) accredited a
38-month association underneath the Prolonged Credit score Facility (ECF) in an quantity
equal to SDR 978.2 million (round US$1.three billion, or 100 % of
quota). This system is predicated on the authorities’ homegrown financial reform
plan that goals to revive macroeconomic stability and foster greater, extra
resilient, and extra inclusive development.

Zambia is coping with the legacy of years of financial mismanagement, with
an particularly inefficient public funding drive. Progress has been too low
to cut back charges of poverty, inequality, and malnutrition which can be amongst
the best on the earth. Zambia is in debt misery and wishes a deep and
complete debt therapy to position public debt on a sustainable path.

The ECF-supported program will assist reestablish sustainability by way of
fiscal adjustment and debt restructuring, create fiscal area for social
spending to cushion the burden of adjustment, and strengthen financial
governance, together with by enhancing public monetary administration. This system
may also catalyze a lot wanted monetary assist from improvement companions.
The Government Board’s determination will allow a direct disbursement
equal to SDR 139.88 million (about US$185 million).

Following the Government Board dialogue on Zambia, Ms. Kristalina
Georgieva, Managing Director, issued the next assertion:

“Zambia continues to face profound challenges mirrored in excessive poverty
ranges and low development. The ECF-supported program goals to revive
macroeconomic stability and foster greater, extra resilient, and extra
inclusive development.

“Restoring fiscal sustainability would require a sustained fiscal
adjustment. The authorities’ adjustment plans appropriately give attention to
eliminating regressive gasoline subsidies, enhancing the effectivity of the
agricultural subsidy program, and lowering inefficient public funding.
Home income mobilization additionally must assist the medium-term
adjustment. The adjustment creates fiscal area for elevated social
spending to cushion the burden on probably the most susceptible, assist cut back poverty,
and to spend money on Zambia’s individuals. The continuing growth of the authorities’
Social Money Switch program and their plans to extend public spending on
well being and schooling are significantly welcome. Along with the fiscal
adjustment, Zambia wants a deep and complete debt therapy underneath the
G20 Widespread Framework to revive debt sustainability.

“A considerable strengthening of fiscal controls is required to assist the
fiscal adjustment, in addition to handle governance and corruption
vulnerabilities. Public funding administration and procurement practices
must be strengthened to make sure transparency and the environment friendly use of
scarce sources. It can even be necessary to bolster the framework for
monitoring fiscal dangers, significantly these associated to massive state-owned
enterprises.

“The Financial institution of Zambia ought to proceed its efforts to cut back inflation and
protect monetary stability. Worldwide reserves ought to be replenished
as situations enable and the change charge ought to proceed to mirror market
situations. Addressing excessive NPL ranges and guaranteeing sufficient capital
buffers may also be necessary.”