China calls for prompt approval and disbursement of Zambia’s ECF

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(Ecofin Agency) – Zambia has reached an agreement in principle with the IMF for an extended credit facility of 1.4 billion dollars. The disbursement of funds is subject to an agreement with the country’s creditors to reduce its debt to sustainable levels.

Last Friday (June 17), China urged the International Monetary Fund (IMF) to approve and disburse a $1.4 billion bailout package for Zambia. “The Chinese side appeals for the IMF to quickly approve and disburse the ECF [Extended Credit Facility] to ZambiaWu Peng – director general of the African Affairs Department at the Chinese Foreign Ministry – said after a courtesy visit to Zambian President Hakainde Hichilema in Lusaka.

The call came just hours after the first meeting of the IMF’s Common Framework Meeting (Zambia’s official creditors’ meeting) to discuss restructuring the country’s debt, which defaulted on repayment of three eurobonds at the end of 2020. No restructuring agreement was reached at the meeting.

Following the meeting with Wu Peng, President Hakainde Hichilema thanked China for agreeing to co-chair the IMF Common Framework meeting with France. “Zambia’s debt situation must be unblocked so that the Zambian economy can be opened up,” he explained.

“… We have agreed to work closely together to further strengthen an all-weather relationship…We are delighted that the phone call we had with President Xi just over two weeks ago has already begun to bear fruit. its fruit,” he added.

Zambia is grappling with a debt burden that reached 120% of its GDP at the end of 2020. Its external debt exceeded $17 billion at the end of 2021, a third of which was owed to China, according to the Zambian government.

Last April, China agreed to co-chair Zambia’s official creditors’ committee with France. The Zambian Finance Minister has repeatedly expressed hope that negotiations will be concluded with the committee by the end of June 2022. However, so far no agreement has yet been reached. Additionally, in December 2021, the country reached an agreement in principle with the IMF for a $1.4 billion credit facility. However, funds cannot be disbursed until creditors agree to reduce debt to sustainable levels.

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