The International Monetary Fund (IMF) has defended its proposed Extended Credit Facility – ECF programme that the new Finance Minister Dr. Situmbeko Musokotwane has proposed to close before the end of the year 2021.
The IMF has stated that the programme will help Zambia to underpin the reforms that government will undertake to address macroeconomic imbalances.
IMF resident representative for Zambia Preya Sharma told the Zambian Business Times – ZBT in an exclusive interaction that an IMF arrangement would help Zambia underpin those reforms and would support the authorities’ request for a comprehensive debt treatment under the G20 Common Framework.
Sharma said at the end of 2020, the Zambian authorities requested Fund support to help implement their economic reform programme to restore macroeconomic stability and address the human and economic impact from the COVID-19 pandemic.
She noted in an interview with ZBT, that notable progress was made during earlier discussions in detailing the key policy measures to address the macroeconomic imbalances currently facing Zambia and to enable a return to sustained growth with enhanced fiscal space for social and development spending.
“We look forward to discussing the new government’s reform priorities as soon as the new Cabinet is in place and with a view to advancing the ECF negotiations,” Sharma said.
When asked if Zambia still needs the IMF bailout package even when it is getting the IMF SDR, She explained that, “While substantial, the SDR allocation does not eliminate the need for external official financing, including from the Fund, and does not change the need for Zambia to undertake the reforms necessary to address macroeconomic imbalances.
Sharma said separately, as a member country of the IMF, Zambia will benefit from its share of the recently approved general allocation of $650 billion of Special Drawing Rights.
She said this decision will help address member countries’ needs for international reserves, build confidence, and foster resilience and stability. Sharma said, importantly, it is expected to help vulnerable countries address the impact of the COVID-19 crisis.
“To avoid confusion, it is important to emphasize that the general SDR allocation is completely separate and distinct from the discussions on an IMF-supported program with the Zambian authorities.
“An IMF arrangement would only be approved if a member country’s debt is assessed to be sustainable with sufficient capacity to repay the Fund. A comprehensive debt treatment under the G20 Common Framework would be expected to achieve that for Zambia,” she added.
