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By Chris Mfula
LUSAKA, Dec 3 (Reuters) - The International Monetary Fund and Zambia on Friday reached a staff level agreement on a $1.4 billion, three-year extended credit facility, bringing the heavily indebted copper producer one step closer to a comprehensive debt overhaul.
Zambia, one of the world's largest copper producers, became Africa's first COVID-era sovereign defaulter last November after years of chronic government overborrowing drove its debt burden above 120% of annual economic output.
"This agreement is based on the authorities’ plans to undertake bold and ambitious economic reforms," Allison Holland, IMF mission chief for Zambia said in an emailed statement.
"The staff-level agreement is subject to IMF Management and Executive Board approval and receipt of the necessary financing assurances."
The government of President Hakainde Hichilema, who was elected in August, had started talks with the IMF in early November.
"The IMF programme will provide much needed fiscal space to Zambia and anchor our domestic economic programme," Zambia Finance Minister Situmbeko Musokotwane said in a statement.
Together with Chad and Ethiopia, Zambia is one of the three countries that have requested a restructuring of its external debt -- which totals $3 billion -- under a common framework agreed last year by China and other Group of 20 members, and the Paris Club of major creditor countries.
Getting approval from the IMF for a programme is a key step for countries in the debt restructuring process. But progress on the framework has been slow.
Zambia's external debt includes around $3 billion in international market bonds, $2.1 billion to multilateral lending agencies such as the IMF and another $3 billion to China and Chinese entities.
Zambia's finance ministry said it would provide more details on the IMF agreement in a joint briefing with the fund on Monday. (Reporting by Chris Mfula in Lusaka and Karin Strohecker in London; editing by Marc Jones)