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December 9, 2020


ZAMBIA: How much hope for an IMF program?

BY Anne Frühauf

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The International Monetary Fund (IMF) said today, 9 December, that it “will be assessing in the coming weeks how the IMF could support the authorities’ reform efforts through a possible Fund program.” Zambia’s request was widely expected, but the prospects for a swift and comprehensive deal still seem uncertain at best. Although an agreement would be a game changer for the disastrous sovereign outlook and acrimonious debt restructuring negotiations, President Edgar Lungu’s government has done nothing in recent months to signal a course correction, casting doubt over any improvements in debt sustainability and transparency.

Still, the three-day high-level meetings in Lusaka on 7-9 December, which featured IMF Africa Department Director Abebe Selassie and Zambia mission chief Alex Segura-Ubiergo, represent the most significant IMF mission in recent years. Arguably, Zambia’s front-runner status as the first pandemic default in Africa raises the stakes for the IMF to ride to the rescue, particularly in the context of the G20’s ‘Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI),’ for which Zambia could come to be seen as a test case.

Other than perhaps the need to make an example of sub-Saharan Africa’s first default and attain a lead role in the restructuring process, it is difficult to see how the IMF’s view of the sovereign can substantially improve, particularly debt sustainability and transparency questions. Precedent is undoubtedly poor: a revolving-door finance ministry has failed to get a deal across the finish line for several years now, despite occasional reform concessions in the direction demanded by the IMF.

The IMF will now assess Finance Minister Bwalya Ng’andu’s Economic Recovery Program, “which seeks to restore macroeconomic stability, attain fiscal and debt sustainability, restore growth and safeguard social sector spending.” However, even if the plan were promising on paper, confidence in implementation has got to be low, considering that concerns over budgeting, debt transparency and governance have never been greater. No recent signs point to any serious intention to rein in the fiscal slide in practice, given further unexplained debt contracting this year and a major increase in the Farmer Input Support Program, which smacks of little more than an election gimmick. With Lungu still single-mindedly focused on securing re-election in 2021, it is difficult to see what has changed, other than the ever more urgent need for external funding. This means that even if Lusaka feels the need to make concessions to secure a deal, the sincerity of any promises must surely remain in doubt.

Crisis management veteran

The IMF’s new mission chief for Zambia is no stranger to debt crises, having served as IMF resident representative in Maputo during some of the worst years of Mozambique’s debt crisis (2013-2016). Segura-Ubiergo had the unenviable task of supporting the government’s efforts to clean up its illegal Ematum bond (subsequently restructured into a sovereign bond), only to get caught up in the disclosure of further hidden debts in 2016, which was the final straw that triggered the country’s 2016 default and the suspension of IMF funding for Maputo. Since then, Maputo has tried to slowly claw its way back towards debt sustainability but has so far only secured emergency relief from the IMF, at least in part because full transparency around the illegal debts remains elusive.

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