The Group of 20 (G20) Common Framework Debt Treatment Agreement between the Zambian government and its official creditors has received praise from the International Monetary Fund (IMF).
The European Union and 19 other nations make up the G20, an international organisation (EU). It strives to solve important global economic concerns, including international financial stability, reducing greenhouse gas emissions, and sustainable development.
The Common Framework considers requests from qualified debtor nations for debt treatment on a case-by-case basis.
An appointment of a Creditor Committee follows a request for debt treatment. IMF and World Bank help the negotiations, in part via their Debt Sustainability Assessments.
The concept is that the debt treatment outlined in the Framework should be followed by changes that ensure the public debt will be sustainable and are in line with a programme endorsed by the IMF’s Upper Credit Tranche (UCT).
By bringing together the Paris Club and official bilateral creditors from the G20 in a coordinated procedure, the Framework signals a sea shift for official creditors.
An important benefit of this strategy is that it will enable long-term solvency challenges to be addressed while ensuring the participation of official creditors and private sector creditors alike thanks to the comparability of treatment clause included in the multilateral agreement, which requires that they offer debt treatments on at least as favourable terms.
Together with the execution of a reform package with IMF funding, it is meant to address bankruptcy and persistent liquidity issues. Traditional “Paris Club” creditors like France and the United States and more recent creditors like China and India are all G20 official creditors.
In addition, the Framework mandates private creditors’ participation under identical conditions to address issues with collective action and guarantee equitable cost sharing.
In a statement made available to the Monday on Thursday, Ms. Kristalina Georgieva, managing director of the IMF, expressed her gratitude.
She said, “I heartily welcome Minister of Finance Situmbeko Musokotwane’s statement that the Zambian authorities have achieved an agreement with their official creditors on a debt treatment compatible with the goals of the IMF-supported plan.
According to her, this special and cutting-edge agreement provides a baseline treatment as well as a contingent one that would be automatically applied if an evaluation of Zambia’s economic performance and policies improves.
“I want to congratulate the official creditor committee for all of their efforts in bringing about this agreement, notably co-chairs China and France and vice-chair South Africa. This is a huge accomplishment for the Paris Club creditors, China, India, Saudi Arabia, and the G20 Common Framework, who came together to reach a comprehensive debt reduction agreement for Zambia.
“This agreement sets the way for the conclusion of the first review of Zambia’s three-year Extended Credit Facility Arrangement, aiding Zambia’s transition to sustainable economic development and alleviating poverty.
She emphasised, “I look forward to the Executive Board discussing this evaluation in the following weeks and the continuance of our fruitful partnership with Zambia in the years to come.
