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Situmbeko Musokotwane faces the arduous task of pulling the country out of the protracted debt crisis, and he prioritizes negotiations with the IMF.
Zambia’s new Finance Minister Situmbeko Musokotwane said in an interview that reaching a loan plan with the International Monetary Fund (IMF) is crucial because it will give creditors confidence and provide the government with cheaper and longer financing.
Musokotwane, appointed on Friday by recently elected President Hakainde Hichilema, faces the daunting task of trying to pull the southern African country out of a protracted debt crisis and has pledged to prioritise talks with the IMF.
In an interview broadcast on Sunday, he told the public broadcaster ZNBC that he believes Zambia will obtain the IMF’s plan before the end of the year and then restructure its debt.
The government has a US$750 million Eurobond that will mature next year, but said it cannot be repaid.
“We have no money to repay. This is why it is important for us to join (a) International Monetary Fund (program) so that we can reschedule the non-payment next year. I am 100% confident that it will be completed,” he said.
Zambia, the second largest copper producer in Africa, stopped repaying its US$3 billion in European bonds and almost all of its foreign debt in November, becoming the first sovereign defaulter in the African continent during the pandemic.
As a well-respected economist, Musokotwane served as Minister of Finance from 2008 to 2011 and was responsible for overseeing the implementation of the last economic plan between Zambia and the International Monetary Fund, which ended shortly before his appointment to this position . He now faces the task of revitalizing an economy that shrank by 3% last year, foreign loans nearly $13 billion, and inflation soaring.
But after Hichilema defeated the incumbent Edgar Lungu by an overwhelming advantage this month, the country’s US dollar bonds and the Zambian Kwacha currency rose, and it is hoped that the new government can quickly resolve its debt problem.
Soaring copper prices rescued the market
The rise in copper prices will help Musokovane’s cause: copper accounts for more than 70% of the country’s export revenue.
The Hichilema government’s goal is to more than double copper production to 2 million tons per year by 2026, and eventually reach about 3 million tons within 10 years. Agency reports.
“We will promote copper production by creating a good environment for more investment,” he said. “You will be surprised at how much foreign exchange this country will create. You will not know what to do with the dollars that this country will receive.”
The Kwacha rose for the third consecutive trading day on Friday, and the exchange rate against the U.S. dollar hit its highest level since March 2020, when the country hinted at restructuring its foreign debt.
Among Zambia’s external debt, approximately US$3 billion is European bonds, US$3.5 billion is bilateral debt, US$2.1 billion is owed to multilateral lending institutions, and the other US$2.9 billion is commercial bank debt.
A quarter of the total amount is held by Chinese or Chinese entities through transactions that include confidentiality clauses, which makes the IMF’s relief negotiations particularly difficult.
Musokovane has stated that he will submit a budget within 90 days after Hickel is sworn in on Tuesday. From a medium to long-term perspective, his first task is to create jobs.
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