LUSAKA (Reuters) – Zambia’s debt restructuring will probably be a combination of haircuts to loans’ authentic worth and maturity extensions, a senior Zambian finance ministry official mentioned Thursday, after the Fund permitted a $1.three billion program for the southern African nation.

Negotiations with collectors to restructure debt that reached $17 billion on the finish of 2021 are beginning now, Mukuli Chikuba, the Everlasting Secretary to the Ministry of Finance, mentioned at a joint Zambian authorities and IMF information convention in Zambia’s capital Lusaka.

The IMF Govt Board approval, an important step within the southern African nation’s quest to restructure its money owed and rebuild an financial system ravaged by mismanagement and COVID-19, would unlock a direct disbursement of about $185 million, the Fund mentioned on Wednesday.

Zambia turned the primary African nation to default within the pandemic period in 2020, combating debt that reached 120% of its gross home product.

“The selection between haircuts and stretching the compensation interval…is a matter of negotiations. And that negotiation will replicate the desire of the actual creditor,” mentioned Zambia’s finance minister Situmbeko Musokotwane.

Some collectors “will select to have their cash sooner,” he mentioned. “Others will select to not have a haircut however get the cash to be paid over an extended time period.”

China, Zambia’s largest bilateral creditor, holding $5.78 billion of its debt on the finish of 2021 in keeping with Zambian authorities information, has tended to go for extending mortgage compensation durations in different restructurings, reasonably than writing down authentic mortgage worth.

The Zambian officers declined to touch upon how Chinese language loans could be restructured, noting that the negotiations had been ongoing.

The IMF’s Debt Sustainability Evaluation, which is able to kind the premise of debt restructuring negotiations with Zambia’s collectors, will probably be printed early subsequent week, IMF consultant Preya Sharma mentioned on the press convention.

The outlook for Zambia is extra constructive however the authorities nonetheless has to do extra, Sharma mentioned.

The $1.three billion IMF mortgage has a zero rate of interest, she mentioned.

Half of the IMF mortgage will probably be used for funds help and half for the nation’s reserves, central financial institution governor Denny Kalyalya mentioned, with value stability and constructing worldwide reserves a precedence.

Even after restructuring its debt, the extent of servicing will nonetheless be “substantial”, Musokotwane mentioned.

He mentioned, although, that confidence and change price stability had returned to the financial system.

Now that Zambia is on the IMF programme, future borrowing could be solely on concessional phrases, Secretary to the Treasury Felix Nkulukusa mentioned.

(Reporting by Chris Mfula; Further reporting by Bhargav Acharaya; Writing by Rachel Savage and David Lawder; Modifying by James Macharia Chege, Tomasz Janowski, Peter Graff)

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