IMF set to decide on Zambia's extended credit facility

The executive board of the International Monetary Fund (IMF) is set to meet on July 12 to complete the first review of the extended credit facility (ECF) agreement it had with Zambia. 

The details 

• This comes days after Zambia restructured its debt owed to external governments, China in particular. 

Key background 

• Last August, the IMF’s executive board approved a $1.3 billion 38-month ECF arrangement with Zambia. The loan was aimed at restoring stability to the country’s economy and stimulating economic growth. 
• However, a staff-level agreement on economic policies to conclude the first review of the arrangement and disburse funds was not reached until April. 
• In a press release, the IMF stated that Zambia would need to reach an agreement to restructure its external debt to secure board approval for the first review.
• Zambia struck a deal last week after protracted talks to restructure $6.3 billion in debt owed to external governments. China was the country’s largest creditor with debts to the tune of $4.1 billion owed to the Export-Import Bank of China alone. 
• The restructuring enabled Zambia’s debt to be stretched over a period of more than 20 years with a three-year grace period where only interest payments are due.  
• Upon board approval for the first review of the ECF arrangement, Zambia is expected to receive $188 million from the IMF. 

Zoom out 

• The IMF has lived up to its reputation as the lender of last resort for several African countries. 
• According to charts on the IMF’s website, more than 40 African countries have a credit arrangement or the other with the IMF. 
• Typically, the IMF demands that countries seeking funding from it make specific economic policies in place before it approves funding.