Zambia is set to receive an additional $388 million boost in financing from the International Monetary Fund by the end of June, as well as the conclusion of a $3 billion restructuring deal with bondholders.

The IMF has reached an agreement with the government regarding the third review of a $1.3 billion economic program.

This agreement includes approving a request to increase it to approximately $1.7 billion to aid with the country's most severe drought in at least four decades, according to a spokesperson for the fund.

Once the emergency lender's management and board approve the agreement, Zambia will have immediate access to approximately $573 million, with a meeting scheduled by the end of June, Bloomberg reports.

Zambia experienced delays in finalising the review as it looked at ways to address a funding gap resulting from the drought, which significantly impacted its harvest and crucial hydroelectric production.

The repercussions of the El Niño-induced dry spell led the southern African nation to halve its economic growth forecast for this year to 2.5% and to seek assistance in addressing a $900 million budget shortfall it incurred.

The Finance Ministry had already received pledges of support totalling around $500 million from cooperating partners to assist in mitigating the impact.

Consequently, Africa’s first sovereign debt defaulter during the pandemic era, which requires the IMF program to renegotiate approximately $13.4 billion in external loans, has received approval from bondholders to complete a $3 billion restructuring. 

This agreement enables the country to begin servicing the new notes and brings it closer to resolving the default situation that has affected it since 2020.

The government still needs to negotiate individual agreements with $3.3 billion in non-bondholder commercial creditors, the most significant of which are China Development Bank and Industrial and Commercial Bank of China.

Additionally, the IMF stated Zambia also has pending bilateral agreements for the implementation of its agreed debt treatment with official creditors.

Zambia's $1.25 billion bond due in 2027 remained relatively unchanged at 76.4 cents on the Dollar at the time of writing, whilst Zambia's Kwacha had fallen 0.9% to 26.20 per Dollar.