Zambia has reached an agreement with the International Monetary Fund on a $1.4 billion bailout clause, which is a key step towards ending the debt crisis of this copper-rich country on the verge of bankruptcy.

The deal has been in the making for several years, and it is a step forward for an African country that became the first African country to default since the beginning of the pandemic last year.

The agreement reached on Friday to extend the three-year credit facility still needs to be approved by the International Monetary Fund’s board of directors, but it is a milestone for the government of President Hakand Hitchlema. A few months later, despite the fact that Zambia The debt continued to rise, but Edgar Lungu delayed negotiations with the IMF.

Africa’s second-largest copper producer’s spending splurge under Lungu’s leadership gave way to an economic slowdown, struggling with approximately US$15 billion in foreign debt (including arrears).

Hicilema has stated that he inherited a “completely empty” treasury after winning the election in August with an overwhelming advantage. He needs an IMF agreement to persuade China and private creditors to restructure their debts and obtain other financial support from bilateral lenders.

Zambia stopped paying US$3 billion in euro bonds last year and negotiated a debt extension with the Bank of China. The agreement reached with IMF staff “is based on the authorities’ plan for bold and ambitious economic reforms.” Alison Holland, head of the International Monetary Fund’s delegation in Zambia, said.

“The International Monetary Fund’s plan will provide Zambia with much-needed fiscal space and consolidate our domestic economic plans,” said Situmbeko Musokotwane, the country’s finance minister.

Hichilema’s goal after coming to power is “to complete the negotiation with the fund, which has already [been] For many years in the shortest time possible,” Musokotwane said. “This is exactly what we did. “

The Hitchlema government is now facing difficult sacrifices to comply with the terms of the International Monetary Fund. It pledged to reduce Zambia’s fiscal deficit from 10% this year to 6.7% of GDP next year, and then target a surplus.

The government has pledged to protect health and education projects and to hand more expenditures to local governments. The rebound in world copper prices this year has cushioned national income.

Hichilema also re-employed a central bank governor. Last year Lungu’s sudden firing caused the anger of the International Monetary Fund and launched an ambitious plan to restore foreign investment in Zambia’s copper mines.

Even with the support of the International Monetary Fund, Hitchlema will still face an arduous task of balancing the interests of Zambian creditors in the negotiations that the Zambian government plans to conclude early next year.

The Ministry of Finance has revealed that Zambia’s share of debt to China is US$6 billion, which is about twice the amount previously reported. Bondholders expressed concern that any funds they gave up would be used to repay Chinese creditors. The government promised to treat all creditors equally.

This year, Zambia has received 1.3 billion U.S. dollars in funding from the International Monetary Fund, which comes from the global allocation of special drawing rights to member countries.