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 11:30 a.m., the copper-producing nation’s currency had gained 2.9% 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.
More Light
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.”
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
