(3 minutes read)
- An International Monetary Fund (IMF)-supported economic program is inevitable for Zambia to bail out the fragile economy from further crashes
- With that concessional loan in its hand, Zambia would be able to replace expensive commercial loans bearing coupon rates of 5.36-8.97% for cheaper zero interest rate loans.
An International Monetary Fund (IMF)-supported economic program is inevitable for Zambia to bail out the fragile economy from further crashes. With that concessional loan in its hand, Zambia would be able to replace expensive commercial loans bearing coupon rates of 5.36-8.97% for cheaper zero interest rate loans.
Experts feel that the IMF program would unlock new opportunities in the southern African country. Zambia is eligible to a quota of approximately US$1.3 billion under new concessional loan facility. Generally, the IMF loan terms and conditions are much more favorable than on any commercial debt. The IMF uses the Extended Credit Facility (ECF), Standby Credit Facility (SCF) and the Rapid Credit Facility (RCF). These loan facilities mostly come with zero interest although they have different maturities and grace periods and are lucrative than raising fu7nds through sale of bonds.
Zambia is seeking a sustained medium- to long-term engagement in case of protracted balance of payments problems. The SCF can be availed by LICs with actual or potential short-term balance of payments and adjustment needs. RCF is the rapid financial support, as a single up-front payout for low-income countries facing urgent balance of payments. The financing under the ECF and SCF carries a zero interest rate at least through June 2021, with a grace period of 5½ years and 4 years, respectively, and a final maturity of 10 years and 8 years, respectively.
