Zambia’s finance ministry has announced plans to cancel projects worth over $2 billion worth as the country seeks to avoid the accumulation of further debt.
Zambia became the first nation to default during the Covid-19 pandemic and by the end of 2021 its external debt stood at $17.27 billion. The nation is currently in negotiations with the IMF over a package to lift itself out of debt.
The decision to cancel an estimated $2.1 billion worth of projects forms part of a broader debt restructuring process, according to the medium-term budget plan published by the ministry of finance. No details have been provided about which specific projects will be canceled.
Struggling to recover following the default, Zambia’s economic growth is expected to slow to 3.1% in 2022, down from 3.6% in 2021 and driven by reduced agricultural output.
The ministry’s plan forecast that the economy would bounce back in subsequent years though, with growth projected to increase through 2023 to 2025.
Objectives laid out in the plan including keeping inflation under 10%, with a target of bringing this down to 7.3% by 2025. The government also plans to maintain reserves at three months’ worth of import cover, and is in the process of changing the law to tighten regulations on borrowing.