[By Alonso Soto and Matthew Hill]
THE International Monetary Fund named a new representative to Zambia, two years after the post was vacated, signaling a possible rapprochement with the southern African nation that is on the verge of default.
The appointment of Preya Sharma, a special assistant to the director of the lender’s Africa department, comes after the government asked Alfredo Baldini to leave in 2018, a move that marked a low point in Zambia’s relations with the IMF. The nation has failed to obtain a loan from the fund since 2016 because of concerns over its borrowing.
Zambia is pursuing a deal with the IMF for new financing under an economic programme, which the country’s creditors see as a crucial step to restructure its $12 billion of external debt. The country is trying to convince bondholders to accept a debt-service holiday and skipped a coupon payment last week, moving closer to becoming the first African nation to default on dollar bonds since the onset of the coronavirus pandemic.
That resulted in S&P Global Ratings cutting its assessment of Zambia’s debt to selective default.
Sharma’s posting is long overdue and “brings a certain ray of hope” to the government’s plan to get IMF financing, Oliver Saasa, chief executive officer at Lusaka-based consultancy Premier Consult said by phone. “It doesn’t bring a reprieve to the government. It just means that the doors aren’t entirely closed.”
The approval of a new programme hinges on the government’s commitment to implement policies to tackle economic imbalances, Africa department director Abebe Aemro Selassie said Wednesday in an interview.
“Zambia faces a very difficult debt situation and there is a need for all stakeholders to put their best foot forward for the country to avoid a crisis,” he said.
The IMF has held discussions with the Zambian government and Abebe said he met finance minister Bwalya Ng’andu during the lender’s virtual annual meetings last week.
Sharma has not yet relocated to Lusaka due to travel disruptions amid the pandemic. Prior to joining the IMF in 2012, she was the head of emerging markets at the UK Treasury. -BLOOMBERG