Zambia is nearing the finalization of a significant debt agreement with its international creditors, including China and Western nations, as reported by an International Monetary Fund (IMF) spokesperson during the IMF-World Bank annual meetings in Marrakesh on Thursday. This development contradicts earlier statements made by IMF's Managing Director Kristalina Georgieva regarding the progress of the agreement.
The memorandum of understanding (MoU), which encompasses $6.3 billion of Zambia's debt, is expected to be signed shortly. Zambian Finance Minister Situmbeko Musokotwane has recognized a committee of lenders led by China, France, and South Africa for their support. He emphasized the importance of economic growth in alleviating debt distress and improving living conditions in Africa.
Zambia defaulted on $18.6 billion of its foreign debt during the Covid-19 pandemic in 2020, with total debt reaching $32.8 billion by 2022. Amid global interest rate hikes due to inflation, this agreement comes as a crucial step for Zambia's financial recovery.
During the same meeting, Georgieva discussed the G20 Common Framework's slow progress in assisting needy countries. She pointed to a positive trend of decreasing agreement durations among creditors, citing Chad, Zambia, Sri Lanka, and Ghana as examples. The Common Framework combines a broad range of traditional creditors like The Paris Club and new ones such as China and India.
Georgieva highlighted the complexities involved in debt restructuring due to diverse creditor configurations and stressed on the importance of the Common Framework. She also noted the successful implementation of the Catastrophe Containment and Relief Trust (CCRT) for COVID relief in poorer nations and emphasized the need to incorporate climate impact considerations into debt restructuring and relief initiatives.
In related news, Sri Lanka is also negotiating a debt deal following its $46 billion debt default amidst food and fuel shortages. French Finance Minister Bruno Le Maire expressed optimism about reaching an agreement soon after Sri Lanka's earlier tentative debt restructuring agreement with China.
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