Zambia’s efforts to restructure its $6.3 billion bilateral debt under the G20 Common Framework have gained widespread support from regional and global institutions, signaling a positive step towards the country’s economic recovery. These institutions are committed to ensuring that Zambia adheres to the agreed-upon debt arrangement, addresses debts owed to private commercial creditors, including Eurobond holders, and implements crucial reforms for sustainable growth.
Last week, the African Development Bank Group convened meetings in Lusaka, where representatives from the United Nations, the European Union, the International Monetary Fund, the World Bank, foreign governments, and the private sector came together to rally behind Zambia with both financial and technical assistance.
African Development Bank President, Dr. Akinwumi Adesina, led the delegation to the meetings and emphasized the need to ensure the success of the debt treatment, preventing Zambia from falling back into a debt crisis. To support the nation’s recovery, the Bank plans to allocate $318 million, with $150 million earmarked for budget support and $168 million from the African Development Fund to finance transformative infrastructure projects, including energy, road, and rail connections with Mozambique, Angola, and the Democratic Republic of Congo.
In addition to the African Development Bank’s support, the European Union has resumed budget support to Zambia, providing €299 million. An additional €60 million will be allocated for health and education, €30 million for the rehabilitation of the Kariba Dam (a major power generation source), and €20 million to support smallholder farmers.
Meanwhile, the World Bank has already approved a $275 million development policy operation for Zambia, aiming to support fiscal and debt sustainability reforms and promote private sector-led growth. Additionally, the International Monetary Fund has granted a $1.3 billion program over three years to assist the government’s efforts in bringing public debt under control.
Zambia has been facing a significant challenge with rapidly increasing private debt, which surged to $18.8 billion in 2020, nearly tripling within six years.
To address these mounting debts, the African Development Bank is offering the services of the African Legal Support Facility (ALSF) to help Zambia renegotiate terms with private external creditors. The ALSF has a proven track record of assisting countries in creditor engagement and debt restructuring, saving governments up to $14.8 billion in underlying transactions in 2021.
President Hakainde Hichilema has prioritized tackling the country’s overwhelming debt burden during his first two years in office. He described the situation as being trapped under a “python of debt” that hindered progress and economic development. President Hichilema emphasized the need for the economy to function efficiently to deliver for the people of Zambia.
To achieve this goal, Zambia requires technical and advisory support in various sectors, including public financial management, debt management, procurement, public-private partnerships, domestic resource mobilization, transparency, and anti-corruption measures.
The private sector has also been called upon to seize emerging opportunities and invest more in Zambia. The agriculture sector, in particular, offers great potential for private sector involvement, with the African Development Bank providing support to reform the farm input support program and streamline the delivery process.
Development partners expressed confidence in President Hichilema’s leadership and believe that he will create an enabling environment for the private sector to invest across critical sectors such as finance, transportation, energy, and mining. With strong support from both local and global partners, Zambia is now on the path to economic recovery and growth, driven by private sector involvement and well-planned reforms.