ECONOMIST Dr. Lubinda Haabazoka has disclosed that the International Monetary Fund (IMF) advised Zambia to default on its external debt in 2020, arguing it would pave the way for faster and more coordinated debt restructuring.
Dr Haabazoka said the recommendation came as Zambia faced mounting fiscal pressure, ultimately leading to its failure to meet a US$42.5 million Eurobond interest payment in November of that year.
He said the IMF based its position on three key considerations, which included that a default would trigger Zambia’s eligibility under the G20 Common Framework for Debt Treatment, enabling coordinated negotiations with both official and private creditors.
Dr. Haabazoka said the second reason was that it would pressure commercial lenders, especially Eurobond holders to agree to comprehensive restructuring.
The third reason given by the IMF according to Dr Haabazoka was that it would allow Zambia to preserve limited resources and prioritise spending on health, education, and pandemic recovery over costly debt servicing.
However, Dr. Haabazoka said that he disagreed with the IMF’s stance at the time and argued that Zambia had viable alternatives that could have avoided the reputational damage and long-term costs associated with a sovereign default.“Zambia could have paid the US$42.5 million interest due while beginning immediate, transparent restructuring talks,” Dr. Haabazoka said.
He also proposed seeking short-term bridge financing from institutions such as the IMF, World Bank, or African Development Bank (AfDB), and suspending or scaling back non-essential capital projects to free up fiscal space.
Dr. Haabazoka said the approach would have preserved investor confidence, maintained Zambia’s credit rating, and allowed for a more orderly engagement under the G20 framework—without the stigma of default.Ultimately, Zambia did default in late 2020, becoming the first African nation to do so during the COVID-19 pandemic.
The move marked a turning point in the country’s debt journey and triggered a nearly four-year-long restructuring process under the Common Framework.
By 2024, Zambia had secured a $13.4 billion debt restructuring agreement involving both official and private creditors, including China and the Paris Club.
The deal extended repayment periods and eased debt service obligations, helping restore investor confidence.As of September 2024, Zambia’s external debt stood at US$13.9 billion.
Dr Haabazoka said although the debt-to-GDP ratio had remained high, reforms in revenue collection, public finance management, and investment priorities were showing early signs of progress.
Dr. Haabazoka said the country’s fiscal history underscores the importance of responsible borrowing, economic diversification, and transparent debt management to ensure long-term sustainability.
