Zambia Finance Minister Targets IMF Deal Before August Elections

Zambian Finance Minister Bwalya Ng’andu expects to secure an International Monetary Fund loan that could underpin debt-restructuring talks with external creditors before the nation holds elections in August.

The government in November became Africa’s first pandemic-era sovereign defaulter after missing a coupon payment on one of its $3 billion of Eurobonds. Holders of the notes have set a deal with the Washington-based lender as a condition for restructuring their debts, but some have expressed concern that it won’t be concluded before the poll.

Zambia Finance Minister Targets IMF Deal Before August Elections

“We want a deal,” Ng’andu said in an interview. “There is absolutely no desire on our part that we delay things to election time and we are hopeful that we’ll be able to reach some agreement with the IMF.”

Economists including Neville Mandimika at Johannesburg-based Rand Merchant Bank see any deal with the fund happening only after November, as fiscal adjustments the IMF will require may be a difficult political sell ahead of the polls. Bondholders account for about one-quarter of Zambia’s $12 billion external debt that it’s seeking to restructure, having unsuccessfully appealed to commercial creditors in September for a six-month interest-payment standstill.

High-Level Visit

Zambia hosted a high-level visit from the IMF in December, and staff are due to hold virtual meetings with officials again from Feb. 11 to discuss the nation’s debt and a possible extended credit facility, Ng’andu said.

The fund may oppose a government decision to increase fuel subsidies and take on an additional $1.5 billion of loans for a state-owned mining investment company when it bought out Glencore Plc’s local unit. Ng’andu said these won’t be deal-breakers.

As part of the meetings, the government will discuss with the fund its debt-sustainability analysis, which Ng’andu expects to finalize by the middle of March. The state will then use that document as the basis for restructuring discussions with bondholders and other creditors, he said.

“It will be a time and a period when we can then sit with the bondholders and say this is what we are proposing should happen,” said Ng’andu. “That will become the material for us to use in our discussions with the bondholders.”

Zambia will seek to use the Group of 20’s so-called common framework to restructure its debt, Ng’andu said. He’s hopeful Chinese creditors that account for more than one-quarter of the nation’s external debt will join that process, in spite of those lenders preferring bilateral discussions.

“The impression that I get speaking to them is that they are very co-operative, they want to be party to the process,” said Ng’andu.

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