Zambia’s kwacha is the world’s best performer against the dollar on Thursday after the nation won long-awaited approval for a $1.3 billion bailout from the International Monetary Fund.
(Bloomberg) — Zambia’s kwacha is the world’s best performer against the dollar on Thursday after the nation won long-awaited approval for a $1.3 billion bailout from the International Monetary Fund.
The IMF announced the funding after 1 a.m. Zambia time. By 3:50 p.m. in Lusaka, the capital, the copper-producing nation’s currency had gained 3.1% against the dollar. It’s at its strongest level since March 10, 2020 — the day before the World Health Organization declared the Covid-19 outbreak a pandemic, sending most developing nations’ currencies into tailspins.
It’s “amazing” to see the deal concluded, given that it’s been many years in the making and a number of different finance ministers under Zambia’s previous administration tried to reach closure, said Simon Quijano-Evans, chief economist at Gemcorp Capital Management Ltd.
President Hakainde Hichilema, known as HH, stayed up until late waiting for news that the Washington-based lender’s board had approved the deal. He got a personal message from Managing Director Kristalina Georgieva with the decision.
“I didn’t go to bed until the IMF board passed the Zambia issue,” Hichilema said in a speech in Lusaka, Zambia’s capital. “Minutes later, the MD herself sent me a message: ‘HH, it’s done’.”
Zambia in 2020 became the first African nation to default on its foreign debt during the pandemic, and has been seeking to restructure external liabilities that reached $17.3 billion last year. Assistance from the IMF is crucial to that process, as is co-operation from Chinese creditors that hold more than one-third of the total.
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The government is using the Group of 20’s Common Framework set of guidelines to revamp its dollar debt. China and France are co-chairing the official bilateral creditors committee, and the government plans on signing a memorandum of understanding on the restructuring by the end of the year, according to the IMF.
Zambia also needs to seek comparable relief from private creditors, including the holders of $3 billion in eurobonds. The IMF has not yet published its debt-sustainability analysis for Zambia that would shed more light on its restructuring plans.
“The international community needs to work on a G-20 Common Framework 2.0 that increases transparency and efficiency and above all includes private-sector lenders in restructuring talks from the very beginning,” said Quijano-Evans. “That is in the interest of all parties.”
The IMF will publish the DSA early next week, Resident Representative Preya Sharma told reporters in Lusaka. The document sets the parameters debt reworking talks will need to adhere to. Those negotiations with private and official creditors will begin “vigorously” this month, Finance Ministry Permanent Secretary Mukuli Chikuba said at the same briefing.
The forms of relief each creditor will thrash out — between maturity extensions or principal haircuts — will be the product of these talks, he said.
(Updates with details in the final two paragraphs)
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