Republic of Zambia
STATEMENT DELIVERED TO THE INFORMAL GATHERING (VIRTUAL) OF BILATERAL
LUSAKA/PARIS, 15 December, 2021 –
I would like to first thank the Paris Club Secretariat for organizing this meeting and giving us the opportunity to provide a status update of our economic and financial situation and introduce our request for a debt treatment under the auspices of the Common Framework.
I would also like to thank all participants to this meeting, longstanding partners of our economic development. We are particularly grateful to all the countries that have already granted us their support by participating to the G20 Debt Service Suspension Initiative. These efforts have borne fruits and allowed us to navigate the crisis while minimizing the social impact on our millions of citizens.
As many of you know, our country has been severely affected by the Covid-19 pandemic, which compounded with an already vulnerable public finance situation has led us into debt distress. Fiscal performance had already been challenging for some time in Zambia, with a budget deficit reaching close to 9% as early as 2019 which increased to more than 14% in 2020 in the context of the economic
recession. The rapid debt accumulation on the backdrop of deteriorating economic activity has led to unsustainable debt levels and massive accumulation of arrears from 2020 onwards.
The Covid-19 crisis, of course, must not take all the blame for our current over-indebtedness. To ensure a rapid economic development of our country, disproportionate reliance has been placed on debt borrowing for several years, beyond our debt carrying capacity and without the appropriate controls. In this context, the engagement with the International Monetary Fund although initiated early on, did not
lead to an agreement as quickly as initially anticipated. The new impetus resulting from the change in the administration of our country this year has allowed a renewed and expedited engagement with the Fund, which recently led to a welcome Staff Level Agreement on a three-year program. We would like to take this opportunity to express our gratitude to our IMF and World Bank partners for the good and
collaborative work leading to the SLA.
This program, supported by a financing arrangement under the Extended Credit Facility, will aim at restoring the sustainability of our public finances, creating fiscal space for social spending in particular, and strengthening economic governance to ensure a shared prosperity.
The new administration did not wait for this agreement to materialize to take decisive measures. Over the past three months, long-awaited measures were decided, providing for a greater independence of the Central Bank, higher flexibility in the implementation of the monetary policy, increased transparency in the procurement processes, enhanced control of budget spending and indebtedness, and the transition
towards cost reflective tariffs in gasoline and utility products.
As we are now looking to get the ECF program approved by the IMF Board of Directors, I came here today to ask for your support. As you are aware, the debt sustainability analysis we have prepared in coordination with the IMF has exhibited the need for a restructuring of our debt. This is reason why we have applied to benefit from the Common Framework for debt treatment. In this respect, I believe that the IMF will inform you of the nature and extent of the debt relief expected from our creditors.
I would like, however, to assure you, throughout the process, of my personal involvement, as well as the availability of my staff and my financial advisor, to engage directly with you and answer any question you might have. The resolution of Zambia’s external debt distressed situation is not only a pre-condition for us to benefit from the financial support of the IMF. It is also the best strategy to reconnect with a dynamic economic growth and foster poverty reduction.
I would like to take the opportunity of this informal meeting to ask you to form as soon as possible a Creditor Committee that will formally evaluate our debt treatment request with the objective of providing financing assurances to the IMF Board of Directors as soon as practicable. It is indeed of critical importance for us to build on the current momentum and start implementing our economic and financial
Finally, I would like to re-assure you that we are fully committed to fulfil our commitments and obligations in the context of the Common Framework, notably in respect of the comparability of treatment among creditors. We will maintain a high degree of transparency with members of the Creditor Committee and keep the Secretariat regularly informed of the progress made in that regard.
Dr. Situmbeko Musokotwane, MP
MINISTER OF FINANCE AND NATIONAL PLANNING
Read Full Presentation: Presentation to Bilateral Creditors – 15 December 2021
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