Zambia’s New Finance Minister Targets IMF Loan Within Months
Zambia’s new finance minister plans to more than double the southern African nation’s copper output in five years and strike a financing deal with the International Monetary Fund by October.
Situmbeko Musokotwane, who President Hakainde Hichilema appointed to the job on Friday, said an economic program with the Washington-based lender will be key to restoring the nation’s credibility and help convince external creditors to extend payment terms. Zambia became Africa’s first pandemic-era sovereign defaulter in November when it stopped servicing its $3 billion in Eurobonds along with almost all its external debt.
A well-respected economist, Musokotwane previously served as finance minister from 2008 to 2011 and oversaw the implementation of Zambia’s last economic program with the IMF that was concluded shortly before he was appointed to the post. He now faces the task of reviving an economy that shrank 3% last year, is buckling under nearly $13 billion in foreign loans and has soaring inflation.
“It is important that we get an IMF program so that we do the necessary reform, convince the creditors that we are serious and will be able to pay back,” he told reporters in Lusaka, the capital. “September, October, we should conclude the issue of the program.”
Elevated prices of copper will aid Musokotwane’s cause: the metal accounts for more than 70% of the nation’s export earnings. He’ll also be aided by an improvement in investor confidence since Hichilema was declared the winner of the Aug. 12 election.
Hichilema’s administration aims to more than double copper output to as much as two million metric tons yearly by 2026, and ultimately about three million tons in a decade, Musokotwane said, referring to the metal used in electric cars as the “new oil”.
“We are going to push production of copper by creating a good environment for more investment,” he said. “You will be amazed how much foreign exchange this country is going to make. You will not know what to do with the dollars that this country will be receiving.”
The kwacha advanced for a third straight session on Friday to the strongest level against the dollar since March 2020, when the nation signaled it would restructure its external debt.
The currency has appreciated by 20% since Hichilema’s election victory was announced on Aug. 16, more than any other tracked by Bloomberg over the period. The southern African nation’s $1 billion Eurobonds due 2024 advanced 0.4% to the highest in more than two years.
Hichilema is targeting an economic growth rate of more than 10% by the end of his five-year term, a level last seen in 2010 when Musokotwane was minister.
The new finance minister’s experience in managing the economy in the aftermath of the 2008 financial crisis will stand him in good stead, as will his dealings with the IMF, where he previously served as an adviser. He’s also worked for Zambia’s central bank, where he oversaw the re-introduction of local-currency bond auctions. Musokotwane has a PhD in monetary economics from Konstanz University in Germany.
©2021 Bloomberg L.P.