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Zambia Sees $388 Million IMF Boost as Bondholders Ratify Revamp

Zambia Sees $388 Million IMF Boost as Bondholders Ratify Revamp

Zambia is set to get a boost from an extra $388 million in International Monetary Fund financing by the end of the month and the conclusion of a marathon $3 billion restructuring deal with bondholders.

The IMF reached a staff-level deal with the government on the third review of an existing $1.3 billion economic program, according to an emailed statement. That included approving a request to augment it to about $1.7 billion to assist with its worst drought in at least four decades, a spokesman for the fund said. Zambia will have immediate access to about $573 million as soon as the emergency lender’s management and board approve the agreement, with a meeting due by the end of June.The copper-rich nation faced delays in completing the review as it worked out how to fill a funding gap caused by the drought, which has hammered its harvest and vital hydroelectric production.

Fallout from the El Niño-induced dry spell prompted the southern African nation to slash its 2024 economic growth forecast by half to 2.5% and appeal for help in closing a $900 million budget shortfall it had caused. The Finance Ministry had already received indicative pledges of support totaling about $500 million from co-operating partners to help deal with the impact.

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Bondholders’ Approval

Hours later, Africa’s first pandemic-era sovereign debt defaulter — which needs the IMF program to rework about $13.4 billion in external loans — won approval from bondholders to finally conclude a $3 billion restructuring. The deal paves the way for it to start servicing the new notes and brings it closer to exit a default that’s ensnared it since 2020.

The government still needs to negotiate individual deals with $3.3 billion in non-bondholder commercial creditors, the largest of which are China Development Bank together with Industrial and Commercial Bank of China.

The IMF said Zambia also has outstanding bilateral agreements for the implementation of its agreed debt treatment with official creditors.

Zambia’s $1.25 billion dollar bond due 2027 was little changed at 76.4 cents on the dollar by 6:19 pm in Lusaka, the capital. Zambia’s kwacha depreciated by 0.9% to 26.20 per dollar.

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