Zambia targets debt deal with IMF in May – FinMin

0

LUSAKA, Feb 1 (Reuters) – Zambia expects an International Monetary Fund (IMF) debt health check to be finalized this month, reach a restructuring deal with creditors by April and get a formal agreement with the fund signed in May, its funding minister says.

“I have to be optimistic, because in the absence of optimism, where can Zambia go?” Situmbeko Musokotwane told Reuters in an interview on Tuesday. “We are a serious group determined to ensure that this debt issue that has plagued us for years and years, we are determined to put this behind us.”

In 2020, Zambia became the first sovereign default of the pandemic era and it is crumbling under a debt burden of more than 120% of gross domestic product (GDP). He reached a personnel agreement on a three-year, $1.4 billion extended credit facility with the IMF in December and now wants to enter into a formal agreement.

Join now for FREE unlimited access to Reuters.com

Register

Outlining an ambitious timetable for the debt restructuring of Africa’s largest copper producer, Musokotwane said he was awaiting the IMF’s debt sustainability analysis, which forms the basis of the restructuring plans, here at the end of February.

Faced with renegotiating his debt with a host of public and private sector creditors, Musokotwane said he hoped to reach an agreement with them in March or possibly April, which would in turn pave the way for a formal agreement with the IMF.

“We hope to be able to do that by May this year,” he told Reuters.

Analysts say the timetable is ambitious because the Paris Club group of creditors and China have not yet formed a creditors’ committee.

China, which has lent heavily to African resource exporters over the past decades, will play a key role in overhauling the debt. Zambia owes more than $6 billion, or 40% of its total publicly guaranteed and unsecured external debt, to Chinese lenders.

“We contacted the Chinese authorities to ask them to be part of this process. In principle, they agreed, on the details, these are details to be worked out,” Musokotwane said. “At the end of the day, I’m very confident that the Chinese authorities and the Chinese institutions that lent us money will play along to get us out of trouble.”

“WEARING THE SOCIETY”

Musokotwane announced in December that Zambia had agreed with the IMF to remove unsustainable energy and agricultural subsidies as part of its reform program.

“The oil sector just didn’t make sense anymore,” he said, adding that the cost of fuel subsidies alone amounted to $800 million a year.

Savings from ending subsidies would be transferred to social spending, including education, which the IMF is also advocating, but no timetable has been set for phasing out support.

“You shouldn’t go too fast. You should take society with you because these are shocks that we introduce into society before they actually see the benefits of what we are doing,” Musokotwane said.

High global copper prices, meanwhile, are expected to help attract the investment needed to enable Zambia to increase its annual production to around 3 million tonnes over the next decade, from around 800,000 tonnes in 2021.

However, the government must first find an investor to take a minority stake in Mopani Copper Mines and fund a planned expansion, Musokotwane said.

State-owned mining investment firm ZCCM-IH (ZCCM.LZ) bought Mopani from Glencore (GLEN.L) a year ago.

The government is also seeking to end a dispute over Konkola Copper Mines (KCM).

Zambia’s previous government handed control of KCM to an interim liquidator in May 2019, sparking a legal battle with India’s Vedanta Resources (VDAN.NS), KCM’s parent company.

“There’s a lot going on behind the scenes. I can’t go into detail because the negotiations are very delicate. But I can assure you it’s happening.”

Join now for FREE unlimited access to Reuters.com

Register

Reporting by Chris Mfula in Lusaka, Karin Strohecker in London and Joe Bavier in Johannesburgh; Additional reporting by Rachel Savage in London; Editing by David Clarke

Our standards: The Thomson Reuters Trust Principles.

Share.

Comments are closed.