JOHANNESBURG, (REUTERS) – The International Monetary Fund’s board on Wednesday approved an immediate $187 million loan payout to Zambia and said the country was revising a restructuring proposal for $3 billion of bonds that official creditors had rejected last month.
It will be the third payout under the southern African country’s $1.3 billion Extended Credit Facility arrangement approved in August 2022.
One of the African continent’s largest copper producers, Zambia defaulted on its debts three years ago during the COVID-19 pandemic, and its restructuring efforts have been beset by delays.
Zambia suffered a major setback in November when its official creditors rejected a preliminary restructuring deal with bondholders over whether it offered comparable debt relief to what they had agreed to.
The IMF’s mission chief for Zambia, Mercedes Vera Martin, told reporters on a conference call that the conditions under which “comparability of treatment” would be met were still under deliberation by Zambia’s Official Creditor Committee (OCC).
In a question-and-answer document posted on its website, the IMF said Zambian authorities were further revising their Eurobond restructuring proposal to meet comparability of treatment requirements, which are defined by official creditors.
“While significant progress has been achieved, some adjustments still need to be made until both program parameters and comparability of treatment, as required by official bilateral creditors, are met,” the IMF said in the document.
Western officials in the past have accused China of holding up the restructuring process, something Beijing consistently denied, while international bondholders complained about being shut out of negotiations.
“It is good that the OCC can voice their concerns about meeting comparability of treatment,” said the IMF’s Martin.
But, she said, the protracted restructuring negotiations were taking a toll on Zambia’s economic recovery, after it was hit by the pandemic and the default. Its kwacha currency has depreciated sharply against the dollar and inflation (ZMCPIY=ECI) has risen in recent months.
Zambia’s government said the IMF board approval of the next loan payout was an endorsement of its reforms and said it would boost investor confidence.