Approved by: Prepared by the staff of the International Development Association (IDA) and the Manuela Francisco and Hassan Zaman (IDA) International Monetary Fund (IMF). and Costas Christou and Jarkko Turunen (IMF). ZAMBIA: JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS Risk of external debt distress In debt distress Overall risk of debt distress In debt distress Granularity in the risk rating Unsustainable Application of judgment No Zambia remains in debt distress. The stock of external arrears (principal and interest) reached 26 percent of GDP by end-year 2023. Despite significant fiscal adjustment, in the absence of the settlement on the Eurobonds exchange and debt restructuring agreements with the non-bonded commercial creditors, Zambia is in overall and external debt distress and public debt remains unsustainable. Under the baseline, all four external debt burden indicators would breach their indicative thresholds by large margins through the medium term.0F 1 The authorities have signed the Memorandum of Understanding with official bilateral creditors on a debt treatment under the G20 Common Framework and have a credible strategy in place to treat commercial creditors on comparable terms. An agreement in principle (AIP) consistent with program parameters and the OCC Comparability of Treatment (CoT) requirements was reached with the Steering Committee of the Ad-Hoc Creditor Committee of Zambia’s Eurobonds holders on March 25, 2024. Under an alternative scenario, where the agreed treatments are applied to the baseline, while other non-bonded commercial claims are treated on comparable terms, debt would be assessed to be sustainable on a forward-looking basis. 1 Zambia’s debt-carrying capacity is rated as weak based on the composite indicator (CI). The composite indicator is calculated using data from the April 2024 WEO and the 2022 CPIA, the latest available. 1 >>> 1. The coverage of Zambia’s public and publicly guaranteed (PPG) debt for the purpose of the DSA includes as in the previous DSA the following: i) central government domestic and external debt, including US$1.6 billion of arrears to external suppliers (fuel and contractors) and central government guaranteed external debt; ii) the nonguaranteed external debt of Zambia Electricity Supply Company (ZESCO), the fiscally important state-owned utility; 2 and iii) the domestic and external arrears 1F of the same enterprise. Central bank external debt (including outstanding Fund credit), together with the debt of social security funds guaranteed by the central government, 3 are also included in the coverage. 2F 2. The DSA incorporates non-guaranteed SOE debt in the baseline. In accordance with the LIC-DSF Guidance Note, given the significant fiscal risks posed by ZESCO, its non-guaranteed external debt 4 and outstanding payables to domestic (US$1.2 billion at end-2023) and external (US$100 million 3F at end-2023) independent power producers (IPPs), are included in the DSA perimeter. The authorities are taking steps to restore ZESCOs’ financial viability over the medium term. As progress is made, the inclusion of its non-guaranteed debt in the DSA debt perimeter will be reassessed. Local governments in Zambia currently cannot borrow externally without the central government’s guarantee. The authorities confirmed that no extrabudgetary funds with outstanding external debt currently exist. 3. The 2021 General SDR allocation has been incorporated into the DSA in line with the staff guidance note. 5 The Treasury, who owned the SDR allocation, 6 used 50 percent of the allocation in F 5F 2022 and 2023, respectively, for budget support. However, the authorities did not draw on the SDR holdings at the IMF SDR Department but transferred the SDR holdings to the BoZ in exchange for kwacha. Consequently, SDR holdings are now part of BoZ’s unencumbered reserves. As the SDR holdings of Zambia remain at least as high as the SDR allocation in the Fund, the Treasury does not owe net SDR interest payments to the IMF. 4. The DSA is conducted on a residency basis. In line with the LIC-DSF Guidance Note, nonresident holdings of domestic-currency debt (as recorded by the authorities) are treated as external debt for the purpose of this DSA, while recognizing the underlying measurement challenges. End- December 2023 data indicates the stock held by non-resident increased during 2023H2 to reach K 56.4billion by end-2023, (US$2.2 billion or 24 percent of the outstanding domestic-currency government securities). This compares with a stock of K 47.4 billion (about US$2.6 billion, 22.5 percent of outstanding domestic-currency government securities) at end-2022. Due to the projected depreciation of the 2 The government guaranteed debt of ZESCO and other SOEs has always been included in the DSA and is now also part of the authorities’ officially published debt metric. ZESCO’s contingent risks to the sovereign relate to its persistent and large cash deficits. See Guidance Note on the Bank-Fund Debt Sustainability Framework for Low Income Countries , 2018, https://www.imf.org/en/Publications/Policy-Papers/Issues/2018/02/14/pp122617guidance-note-on-lic-dsf 3 As of end-December 2022, this debt consists solely of an outstanding government guaranteed external loan to the Public Service Pension Fund of US$52.7 million. 4 ZESCO generated sufficient revenues in 2023 to continue servicing its nonguaranteed external debt, which has been completely amortized by end-December 2023. 5 See Guidance Note for Fund Staff on the Treatment and Use of SDR Allocations, August 2021, https://www.imf.org/en/Publications/Policy-Papers/Issues/2021/08/19/Guidance-Note-for-Fund-Staff-on-the-Treatment- and-Use-of-SDR-Allocations-464319. 6 Equivalent to about US$1.3 billion. 2 >>> exchange rate by end of the year, the dollar amounts of the stock held by non-resident is decreasing. The authorities are restricting participation of non-residents in the primary market given the debt sustainability risks. In 2024-25, a limit of 5 percent of the face value of gross domestic bonds issuance will be applied in line with the agreement on the restructuring perimeter reached with the OCC in June 2023. By the end of the first quarter in 2024, the 5 percent limit on non-residents participation in the bonds primary market has already been reached. Subsectors of the public sector Sub-sectors covered 1 Central government X 2 State and local government 3 Other elements in the general government 4 o/w: Social security fund X 5 o/w: Extra budgetary funds (EBFs) 6 Guarantees (to other entities in the public and private sector, including to SOEs) X 7 Central bank (borrowed on behalf of the government) X 8 Non-guaranteed SOE debt X 1 The country's coverage of public debt The central government plus social security, central bank, government-guaranteed debt, non-guaranteed SOE debt Used for the Default analysis Reasons for deviations from the default settings 2 Other elements of the general government not captured in 1. 0 percent of GDP 0.0 3 SoE's debt (guaranteed and not guaranteed by the government) 1/ 2 percent of GDP 12.0 ZCCM-IH purchase of Mopani from Glencore. 4 PPP 35 percent of PPP stock 1.4 5 Financial market (the default value of 5 percent of GDP is the minimum value) 5 percent of GDP 5.0 Total (2+3+4+5) (in percent of GDP) 18.4 1/ The default shock of 2 percent of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the coutnry’s public debt definition (1). If it is already included in the government debt (1.) and risks associated with SoE’s debt not guaranteed by the government is assess to be neglibible, a country team may reduce this to 0 percent. 5. The December 2023 DSA, assessed Zambia’s debt risk as in debt distress. 7 This followed 6F Zambia’s default on its sovereign Eurobonds in 2020 and the accumulation of arrears to both official bilateral and other commercial external creditors. Note that the accumulation of external arrears in 2023 only relates to claims in the debt restructuring perimeter. To help address their debt sustainability challenge, the authorities requested a debt treatment under the G20 Common Framework (CF) in January 2021. 6. The Official Creditor Committee (OCC) under the CF, formed in June 2022, reached agreement on a memorandum of understanding (MoU) on terms of the debt restructuring in October 2023. The MoU reflects the agreed debt treatment consistent with program parameters announced in June 2023, and has been signed by all OCC members. In parallel, the authorities engaged in good faith negotiations with its Eurobond holders, facilitated by the bondholder committee that was established in July 2020, and other external private creditors. An agreement in principle for restructuring Zambia’s Eurobonds, consistent with program parameters and Comparability of Treatment (CoT) 7 Zambia: Second Review Under the Arrangement Under the Extended Credit Facility, Requests for a Waiver of Nonobservance of a Quantitative Performance Criterion, Modifications of the Monetary Policy Consultation Clause and of Quantitative Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Zambia. The LIC DSF Guidance Note (footnote 2) calls for an assessment of ‘in debt distress’ when restructuring with the majority of commercial creditors has not been completed. 3 >>> requirements as set by the OCC, was announced on 25 March 2024 and the consent solicitation was launched on May 13, 2024. 7. Zambia’s external PPG debt increased to US$21.6 billion by end -2023. This reflected close to US$710 million in new foreign-currency denominated external debt disbursements to the central government—principally by the IMF and World Bank —and an increase in interest arrears on central government foreign currency-denominated external debt of about US$439 million in 2023. The stock of expenditure arrears (fuel and contractors) due to non-resident suppliers, together with the stock of ZESCO’s arrears to external IPPs was broadly unchanged at US$1.75 billion at end-December 2023. However, the stock of non-resident holdings of domestic-currency debt declined in dollar terms to US$2.2 billion by end-2023 due to the exchange rate depreciation. In parallel, while further interest arrears (of US$90 million) also accumulated on government guaranteed external debt, ZESCO’s non - guaranteed external debt was fully amortized in 2023 as it generated sufficient revenues in 2023 to continue servicing it.8 As a result, external PPG debt ended the year about US$639 million higher (see text Table 2). In parallel, the outstanding stock of domestically-issued government securities stood at K 232 billion at end-2023 (or 41 percent of GDP), up from K 210 billion a year ago. With domestic budget arrears (in dollar terms) and ZESCO domestic IPP arrears declining, total PPG debt ended 2023 at about US$31.2 billion (or 141 percent of GDP). 8. The creditor composition of external debt (see text Table 2) reflects the representation of the official creditors in the OCC. Official representatives of some countries with eligible claims represented in the OCC have made requests to classify their claims backed by an official export-credit agency as commercial claims, in particular China has requested to classify all Sinosure-backed commercial claims as private claims. 9 These claims are included as part of commercial creditors’ claims, 7F and the arrears related to these claims are considered as arrears to the private sector for the purpose of the application of Fund’s policies. Given this classification, commercial credito rs share in total external debt has reached 32 ½ percent in this DSA update. 8 A payment of US$1.5 million was made by ZESCO also on government guaranteed debt in January 2024, which was communicated by the authorities to the OCC Secretariat. 9 Under the Debt Service Suspension Initiative (DSSI), China requested to classify its national development bank, the China Development Bank, as a commercial creditor. This is consistent with the classification requested under the Common Framework. 4 >>> 2 3 Debt stock (end of period) Debt service 2023 2024 2025 2024 2025 (Percent (Percent 10 (In US$) total debt) GDP) (In US$) (Percent GDP) Total 31,244 100.0 141.1 3,289 5,463 11.7 19.4 External Foreign-Currency Debt 19,390 62.1 87.6 331 2,581 1.2 9.2 4 Multilateral creditors 4,151 13.3 18.7 156 155 0.6 0.6 IMF 563 1.8 2.5 World Bank 2,252 7.2 10.2 ADB/AfDB/IADB 917 2.9 4.1 Other Multilaterals 419 1.3 1.9 o/w EIB 207 0.7 0.9 o/w IFAD 132 0.4 0.6 5 Bilateral creditors 6,456 20.7 29.2 130 120 0.5 0.4 Paris Club 1,524 4.9 6.9 45 14 0.2 0.0 o/w: Israel 488 1.6 2.2 o/w: UK 249 0.8 1.1 Non-Paris Club 4,932 15.8 22.3 85 106 0.3 0.4 o/w: China 4,174 13.4 18.9 o/w: India 345 1.1 1.6 Eurobonds 3,715 11.9 16.8 - 1,448 - 5.1 Commercial creditors 3,313 10.6 15.0 45 858 0.2 3.0 Fuel arrears 897 2.9 4.1 n/a n/a n/a n/a Arrears to external contractors 757 2.4 3.4 n/a n/a n/a n/a ZESCO external IPP arrears 101 0.3 0.5 n/a n/a n/a n/a Domestic-Currency Debt 11,854 37.9 53.5 2,958 2,882 10.5 10.2 Held by residents, total 6,855 21.9 31.0 2,517 3,347 8.9 11.9 Held by non-residents, total 2,192 7.0 9.9 441 314 1.6 1.1 T-Bills 1,747 5.6 7.9 1,978 2,000 7.0 7.1 Bonds 7,301 23.4 33.0 980 882 3.5 3.1 Loans - - - Domestic budget arrears and ZESCO domestic IPP arrears 2,806 9.0 12.7 Memorandum Items: Collateralized debt6 2,428 7.8 11.0 o/w: Related o/w: Unrelated Contingent liabilities n/a n/a n/a o/w: Public guarantees 7 o/w: Other explicit contingent liabilities SOE guaranteed external debt8 1,560 5.0 7.0 SOE non-guaranteed external debt (ZESCO)8 - 0.0 - 9 Total external PPG debt 21,583 69.1 97.5 Nominal GDP 28,163 1/ Based on end-December 2022 data from the authorities (before the application of the debt treatment) and IMF staff estimates. It includes arrears on principal and interest. It does not include any penalty fees or interest on the arrears. 2/ Includes direct debt to central government, SOE guaranteed debt and non-guaranteed debt of ZESCO 3/ Contracted debt service; creditor classification according to the OCC representation. 4/ "Multilateral creditors” are simply institutions with more than one sovereign as a shareholder and may not necessarily align with creditor classification under other IMF policies (e.g. Lending Into Arrears). 5/ Includes loans to central government and loans backed by guarantee from an official export-credit agencies, except Sinosure backed commercial claims. 6/ Based on latest available data, as of end-December 2022, there was around $2.5 billion of disbursed external foreign-currency debt (inlcuding non-guaranteed debt of ZESCO) with some form of security or escrow arrangement that could be considered as collateralized debt, including debt with a government guarantee or third-party (exporter) guarantee as security. Almost all this debt is in arrears and, where the security or escrow provides for a claim on funds in a specific account, the authorities have reported zero balances in those accounts. The exception is the non-guaranteed external debt of ZESCO which is collateralized with receivables and which is being serviced. Debt is collateralized when the creditor has rights over an asset or revenue stream that would allow it, if the borrower defaults on its payment obligations, to rely on the asset or revenue stream to secure repayment of the debt. Collateralization entails a borrower granting liens over specific existing assets or future receivables to a lender as security against repayment of the loan. Collateral is “unrelated” when it has no relationship to a project financed by the loan. An example would be borrowing to finance the budget deficit, collateralized by oil revenue receipts. See the joint IMF-World Bank note for the G20 “Collateralized Transactions: Key 7/ Based on information received, there are no such contingent liabilities. Includes other-one off guarantees not included in publicly guaranteed debt (e.g. credit lines) and other explicit contingent liabilities not elsewhere classified (e.g. potential legal claims, payments resulting from PPP arrangements). 8/ Reflected in external foreign-currency public debt in this table. 9/ Total PPG external debt comprises total external foreign-currency debt, domestic-currency debt held by non-residents, fuel arrears, arrears to external contractors, and ZESCO non- guaranteed external debt and arrears. 10/ The debt-to-GDP ratios are calculated from the value in national currency by converting outstanding debt in US dollars at eop exchange rate, and nominal GDP at average period exchange rate. Sources: Zambian authorities and IMF staff calculations. 9. Zambia remains without access to international capital markets. After peaking at 6,954 basis points on March 20, 2023, weighted average spreads on Eurobonds narrowed to 1,359 bps by May 22, 2024. Reflecting a decrease in uncertainty around the debt restructuring process, non-resident investors 5 >>> came back to the domestic debt market in 2023, notably in the bonds market, reaching 30 percent of total bonds issued by end-December 2023. As a consequence, the share of non-resident holders of domestic debt increased to 24 percent at end-2023, up from about 22.5 percent at end-2022, but still lower than a peak of around 29 percent earlier in 2022 (see Text Figure 1). The return of non-residents led to an increase in demand at bond auctions and domestic yields began to come down in the second half of 2023. Financing risks remain elevated consistent with the DSF market-financing module, although the signal of this module is currently less relevant given Zambia is currently shut-out from international markets (Figure 5). Zambia: Stock Composition Composition of Holders (Billions of Kwacha, at Face value) (In Percent) 250 100 90 200 T-bills Bonds 80 70 150 60 50 100 40 30 50 20 10 0 0 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Bills Bonds Source: Bank of Zambia Bank of Zambia Commercial banks Non-bank public Foreign Sources: Zambia authorities and IMF staff estimates The macroeconomic framework underpinning this DSA is consistent with the baseline of the Third Review of the ECF program. Key changes from the previous DSA include a downward revision to real GDP growth and less fiscal adjustment in 2024, a broadly unchanged current account balance over the medium term, and a much weaker exchange rate. 10. Recent developments. Real GDP is estimated at 5.4 percent in 2023, an upward revision from the previous update mainly driven by a larger-than-expected expansion in the non-mining and non- agricultural sectors, more than compensating a declining output in the latter. The 2024 outlook deteriorated sharply due to the drought shock with GDP growth projected at only 2.3 percent. In 2023, the primary fiscal surplus (on a commitment basis) reached 1.5 percent (0.9 ppts higher than projected at the previous DSA update) on the back of higher non-mining tax revenues (by 0.6 percent of GDP) and grants (0.4 percent of GDP). In parallel, the primary balance on a cash basis improved by 2.2 percentage points of GDP, to a surplus of 0.6 percent of GDP in 2023, including on the back of accumulation of expenditure arrears. 11. Growth. Medium-term growth assumptions for 2024-33 are broadly unchanged on average from the previous DSA, despite the more deteriorated outlook in the near term caused by the one-time shock of the drought at the beginning of 2024. The authorities selected a new strategic partner for Mopani Copper 6 >>> Mines on December 1, 2023, and have found an investor to resolve the situation with Konkola Copper Mines, both of which would boost copper and cobalt production significantly. Growth is expected to average around 5 percent over 2024-33. Structural, fiscal, and institutional reforms are projected to build the foundation for sustained growth over the long run that is driven by a competitive private sector. For example, the improved mining fiscal regime should contribute to meeting the authorities’ target of t ripling copper production by 2030, while measures to implement the WTO Investment Facilitation Agreement and the AfCFTA Investment Protocol should attract increased FDI more generally, implementation of ZESCO’s turnaround plan and the introduction of a five-year electricity tariff schedule should bring financial sustainability to the power sector and attract investments in new generation in line with the Ministry of Energy’s Integrated Resource Plan that was approved in November 2023. Implementation of the Comprehensive Agricultural Transformation Support Programme should increase agricultural productivity and the sector’s resilience to climate change. Reorienting expenditure away from inefficient subsidies and toward investments in education, health, and social protection will help build human capital. Decentralization of public services to the communities is anticipated to increase the efficiency of spending and aid reforms to increase budget credibility and fight corruption. 12. Inflation. Near-term Inflation projections have been revised upwards relative to the previous DSA. Delays in signing the Memorandum of Understanding with the OCC and reaching an agreement with the Eurobonds holders have adversely affected confidence, with kwacha depreciating and inflation reaching 13.1 percent by end-2023.8F10 The Bank of Zambia tightened monetary conditions —increasing both the monetary policy rate and statutory reserve requirements on deposits —in response to emerging inflationary pressures. In 2024, inflation is expected to peak at 15 percent by the end of the year, before stabilizing around the mid-point of the Bank of Zambia target band by end-2025, broadly unchanged from the previous DSA. 13. External. The medium-term outlook for the external position remains broadly unchanged from the previous DSA. The current account deteriorated by US$1.6 billion in 2023 on account of a significant decline in the trade balance, turning into a deficit of about US$545 million, and it is projected to remain broadly on balance in 2024, at -0.2 percent of GDP. Export growth was lower than projected in the ECF- request on account of weaker copper production and lower non-mining exports due to the drought. Economic recovery, fiscal expansion, high fuel and energy prices did lead to an increase in imports by about US$0.8 billion in 2023. Drought-related imports of maize and electricity and lower exports will worsen the trade balance in 2024 relative to previous update. In 2023, the fall in mining export revenues led to a sharp decline in assets held abroad by resident and a decline in the financial account, despite the return of non-residents to the domestic market, on the back of negative net FDI flows. The Bank of Zambia increased the level of gross reserves to the level estimated at the time of the second review and met the end-December 2023 NIR target. The external position is projected to improve following the debt restructuring and the continued implementation of policies under the program that will reduce the deficit, improve business confidence, and attract further foreign direct investment. The (non-interest) current account balance is expected to register an average of 10½ percent of GDP surplus for the period 2024- 2033, a slight increase from the previous DSA. The global green energy transition should boost long-term demand for Zambia’s copper, cobalt, and other mineral resources. The improved current and financial 10The inflation figures in the text refer to end of period projections, while Text Table 3 shows the average over the period assumptions. 7 >>> accounts are expected to support the build-up of FX reserves to the targeted five months of prospective imports by the end of the program. 2021 2022 2023 2024 2025 2026 2027 2028 (Annual percentage change) Real GDP Growth December DSA 6.2 5.2 4.3 4.7 4.8 4.8 4.9 5.0 Current DSA 6.2 5.2 5.4 2.3 6.6 5.9 5.6 5.1 Inflation December DSA 20.5 11.0 11.0 11.4 7.8 7.0 7.0 7.0 Current DSA 20.5 11.0 10.9 14.6 12.1 7.0 7.0 7.0 GDP Deflator December DSA 25.1 6.1 10.2 10.6 7.6 6.6 6.7 6.6 Current DSA 25.1 6.1 9.3 20.2 9.9 5.0 5.9 6.6 (Percent of GDP) Primary Deficit (on Commitment Basis) December DSA 5.8 -0.8 -0.6 -2.9 -3.7 -2.7 -2.6 -2.6 Current DSA 5.8 -0.8 -1.5 -2.9 -3.3 -3.0 -2.6 -2.1 Primary Deficit (on Cash Basis) December DSA -2.1 -1.6 1.3 1.1 1.7 1.0 1.7 1.9 Current DSA -2.1 -1.6 0.6 -0.7 2.1 1.9 1.7 1.6 Non-Interest Current Account Balance December DSA 19.1 7.2 0.6 6.7 8.1 9.6 11.6 11.3 Current DSA 19.1 8.7 1.4 2.5 9.1 7.7 8.1 7.9 Net FDI Inflows December DSA 3.1 1.2 1.3 2.0 2.9 3.8 2.7 2.7 Current DSA 3.1 0.6 -0.1 3.8 3.8 4.5 4.3 4.3 (Percent) Avg. Nominal Interest Rate on External Debt December DSA 5.2 4.3 2.9 4.0 4.2 4.1 4.2 4.4 Current DSA 5.2 6.4 4.2 3.2 3.5 3.4 3.4 3.6 (Millions of dollars) Project Loan Disbursements (Incl. Guarantees) December DSA 571 438 583 436 447 297 204 706 Current DSA 571 438 296 464 640 298 255 197 Source: IMF staff projections. 14. Fiscal. Fiscal performance is expected to continue improving under the program, despite the shocks related with the 2024 drought. Most of the drought-related spending are being met by additional grants and expenditure reprioritization. Even though the primary balance in 2024 (on cash basis) is expected to turn negative to 0.7 percent of GDP, this includes the liability management operation to clear fuel arrears (of 2.3 percent of GDP) with the primary balance on commitment basis at 2.9 percent of GDP. Building on the success in delivering a sharp consolidation in 2022 and 2023, and to continue helping place public debt on a declining path, the primary balance (commitment basis) is targeted to further improve to a surplus of 3.3 percent of GDP by 2025 (an additional 1.4 percentage point adjustment in 2024, and 8 >>> respectively, 0.4 percentage point in 2025). Revenues (adjusted for arrears on VAT refunds) are projected to increase to 21.6 percent of GDP by 2025, compared to their 2019 (pre-COVID) level of 19.3 percent of GDP, underpinned by the authorities’ medium-term revenue mobilization plan, which includes eliminating tax expenditures (implicit subsidies) on fuel worth about 1.2 percent of GDP, together with other measures to broaden the tax base and strengthen compliance. The authorities are making further efforts to improve spending efficiency by strengthening cash management and commitment controls and through new systems for screening and approving new public investment projects. Implementation of a new Public- Private Partnership Law should enable the authorities to close Zambia’s infrastructure gaps by mobilizing private capital to finance the public investment program. Overall, these efforts are projected to translate into a further adjustment of 1.6 percentage points in the primary balance (cash basis) In 2025 relative to 2023. 15. Financing. Financing assumptions are guided by the debt conditionality under the program. Domestic borrowing will remain a key source of financing for Zambia, though concessional 900 IMF World Bank AfDB borrowing—primarily from 750 the IMF, World Bank and 600 African Development 450 Bank—will comprise an 300 important part of the 150 financing mix (Text Figure 0 2). External financing during 2022-25 will come -150 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 from the disbursements of US$1.8 billion on contracted but undisbursed priority project loans, about Sources: IMF and World Bank staff estimates. World Bank financing includes US$1.6 billion expected disbursements on grant terms from new operations approved in FY24-FY26 new financing from the World Bank (including grants), US$1.7bn financing from the IMF, and US$250 million from the African Development Bank. 11 Under the program, Zambia will not undertake any non-concessional borrowing 9F unless an exception is granted in line with the IMF’s Debt Limit Policy or World Bank Sustainable Development Finance Policy. Access to international markets is assumed to be lost through the medium term, and non-residents participation in the domestic debt market is expected to remain limited, including due to the authorities’ efforts to limit their participation in new issuances over the program period in order to safeguard external debt sustainability. 11 Beyond the IDA20 replenishment cycle (July 2022 through June 2025), IDA financing figures are based on assumptions. Actual financing will depend on IDA replenishment volumes, country performance, and other operational factors. Delivery of DPFs will be dependent on an agreement with the government on a strong program of policy and institutional reforms, and adequacy of the macroeconomic policy framework. 9 >>> 16. Relative to the previous DSA update, the agreement with the official creditors under the weak debt carrying capacity is included in the baseline. Official creditors represented by the G20 Common Framework OCC have reached an agreement on a debt treatment for Zambia that is in line with the financing assurances provided in June 2022, agreement that has been embedded in a Memorandum of Understanding that was signed by all parties. This agreement entails a fully quantified two-stage approach that includes a state contingent treatment with a trigger linked to Zambia’s debt carrying capacity (DCC). In the base case that is consistent with Zambia remaining assessed as having a weak DCC, official creditors will significantly lengthen the maturity of their claims and reduce their interest costs consistent with the parameters of the ECF-arrangement. The state-contingent clause will be evaluated at end-2025. If, at this stage, the assessment of Zambia’s economic performance and policy making warrants an upgrade to a medium DCC, the upside treatment will be triggered and there will be some acceleration of principal payments and higher interest payments to official creditors. This treatment will remain anchored in the LIC-DSF and meet the corresponding DSA thresholds at medium DCC, i.e., the PV of external debt- to-exports at “substantial space to absorb shocks” threshold at 108 percent by 2027 and maintaining the external debt service-to-revenue ratio at or below the 18 percent threshold over 2026-31. 17. As in the previous DSA update, the restructuring strategy for private claims is presented as an alternative scenario of the DSA, as discussions with non-bonded commercial creditors are still ongoing. Private creditors are expected to deliver a treatment consistent with the DSA parameters and on comparable terms with the OCC. Treatment provided by all private creditors must also remain anchored in the LIC-DSF and meet the corresponding DSA thresholds. In line with the provisions of the G20 Common Framework, comparable treatment will be assessed by taking into account the change in debt service, the NPV loss, and the change in the duration of the claims 12 10F 18. A debt treatment in line with program parameters has been agreed for about half of the private claims’ perimeter, expected to be implemented by the second half of June, while discussions with the residual private creditors are expected to be finalized by the end of the year. On March 25, 2024, the authorities reached an agreement in principle (AIP) with the Steering Committee of the Ad Hoc Creditor Committee of Zambia’s Eurobonds holders, which was assessed by staff as consistent with program parameters. OCC equally confirmed that the OCC Comparability of Treatment (CoT) requirements are met. As for the OCC treatment, the AIP with bondholders includes an upside scenario activated by a dual trigger linked to Zambia’s DCC and/or the performance of the 3 -year moving average of exports (in US$) and the US$-equivalent of fiscal revenues relative to the IMF staff projections as released at the time of the second review of the ECF arrangement. 13 The state-contingent clause will be evaluated over a three-year period, from January 2026 to December 2028. The upside treatment remains anchored in the LIC DSF and meets the DSA corresponding sustainability targets at medium DCC, similarly to the OCC treatment. In the base case scenario, where Zambia remains at weak DCC, the bondholders will be offered two new notes in exchange of the Eurobonds, which imply a nominal haircut of about 20 percent and significant cash debt relief over the program period. One of the notes includes the state-contingent clause, which if triggered, would lead to an acceleration of payments, and higher coupon 12 As described in the Common Framework term sheet adopted by the G20 and endorsed by the Paris Club in November 2020. 13 A persistent overperformance in both US$ exports and the US$-equivalent of fiscal revenues relative to the second review macro-framework was assessed by staff as highly correlated with an upgrade in the debt carrying capacity. 10 >>> payments. The authorities launched a consent solicitation on May 13, 2024, and announced in June that participation has reached more than 90 percent of the face value of the claims. 19. Relative to the previous DSA update, the baseline also includes the revised strategy for the clearance of arrears, in particular, the fuel arrears to external suppliers. The authorities announced a liability management operation aimed at seeking net present value gains on the fuel arrears clearance. The stock of fuel arrears reached $897 million at end-2023 (a 50-percent increase over 2022), of which only 48 percent represented principal, the rest being due to accrued interest and penalties. The operation will be financed through a loan denominated in U.S. dollars from domestic banks. Banks will secure the funding by drawing on their assets held abroad. Besides achieving net present value gains, the operation shifts external liabilities to domestic FX liabilities for the government mitigating the external debt sustainability risks caused by the drought shock. 20. At the operational level, debt sustainability will also be supported by the debt conditionality under the IMF program and the IDA Sustainable Development Finance Policy. These stipulates a zero ceiling on new non-concessional external borrowing during the program period. The program sets a ceiling on the PV of new concessional external borrowing as well. The Indicative Target (IT) on the present value of new external borrowing is set in line with the expected borrowing plan for 2024-25 (see Text Table 4). The 2024 borrowing program (Text Table 4) also include loans in the pipeline that are likely to be part of the 2025 budget and expected to be signed by end-2024. If the signature of these loans is delayed into 2025, the borrowing program projections could be revised accordingly at the next review. In 2025, no other new external borrowing is expected, except the financing from the IMF, World Bank, AfDB, and issuances on domestic market. 11 >>> January 1, 2023 to December 31, 2024 PV of new debt in PV of new debt in Volume of new debt 2023-24 (program 2023-24 (including PPG external debt in 2023-24 purposes) negative GEs) USD million Percent USD million Percent USD million Percent By Sources of Debt Financing 175.0 100 71.9 100 71.9 100 Concessional Debt, of which 175.0 100 71.9 100 71.9 100 IFI debt 175.0 100 71.9 100 71.9 100 Other 0.0 0 0.0 0 0.0 0 Non-Concessional Debt, of which 0.0 0 0.0 0 0.0 0 By Creditor Type 175.0 100 71.9 100 71.9 100 IFI 175.0 100 71.9 100 71.9 100 Other 0.0 0 0.0 0 0.0 0 Uses of Debt Financing 175.0 100 71.9 100 71.9 100 Infrastructure 175.0 100 71.9 100 71.9 100 Memo Items Indicative projections Year 2 0.0 0.0 0.0 1/ In line with the TMU definition of debt ceilings, it does not include new financing from IMF, World Bank, AfDB and projected issuances of local-currency debt to non-residents Sources: IMF staff calculations based on authorities’ reported data. 21. Downside risks to the outlook. Uncertainties around the outlook for copper prices and production is a key source of risk. 14 Rainfall variability also remains a key risk to Zambia’s sustainable growth, affecting 1F critical sectors like agriculture, electricity and mining, and also likely to aggravate external vulnerabilities, although the authorities’ reform agenda aims to mitigate these risks over time. The materialization of these risks would increase debt vulnerabilities. 22. Upside risks. These stem mainly from a faster global and domestic growth, a speedy resolution of the remaining aspects of the debt restructuring, greater confidence effects, including from stronger and broader reform momentum, higher copper prices and realization of announcements to invest in mineral development. 23. Realism tools suggest that baseline scenario projections are reasonable. The DSA realism tools (Figure 3, 4) highlight the large size of the programmed fiscal adjustment relative to outcomes in other LIC programs, and the likelihood of a diminished growth contribution from public investment over the forecast period. However, the risk that the adjustment proves infeasible is mitigated by the demonstrated track record of the authorities to take needed measures. The unusual relation between the fiscal adjustment and the growth projections in 2024 and 2025 under the baseline is due to the impact of the drought shock, and respectively, the rebound expected in 2025. 14 The baseline is based on futures market prices, which suggest prices will remain at recent elevated levels, and are consistent with the assumptions under underpinning the [April 2024 IMF World Economic Outlook]. 12 >>> 24. Zambia’s debt-carrying capacity under the Composite Indicator (CI) rating is assessed as weak, unchanged from the previous DSA. 15 The latest CI score of 2.62 remains below the cut-off for 12F medium debt-carrying capacity of 2.69, so the assessment of debt sustainability is based on the thresholds for a weak debt-carrying capacity country. 25. The DSA includes stress tests that follow standardized and tailored settings. The standardized stress tests indicate breaches of all debt thresholds for an extended period. Zambia has a significant reliance on commodity exports that triggers the commodity price shock, but the natural disasters shock does not apply. Given significant Eurobond issuance in the past, the market financing tool applies. The contingent liabilities shock is calibrated to Zambia, with an additional 10 percent of GDP added to the standard SOE shock to account for risks stemming from the debt of SOEs, as well as potential contingent risks arising from the 2020 acquisition of the Mopani mine by ZCCM-IH, a majority state-own investment holding company.3F16 The rest of the components under the contingency liability shock are kept at their default settings. Debt Carrying Capacity Weak APPLICABLE APPLICABLE Classification based on Classification based on the Classification based on the two EXTERNAL debt Final current vintage previous vintage previous vintages burden thresholds TOTAL public debt benchmark Weak Weak Weak Weak PV of debt in % of PV of total public debt in percent of GDP 35 2.62 2.57 2.59 Exports 140 GDP 30 Note: Until the April 2019 WEO vintage is released, the two previous vintages ago classification and corresponding score are based solely on the CPIA per the previous framework. Debt service in % of Exports 10 Revenue 14 Calculation of the CI Index Components Coefficients (A) 10-year average values CI Score components Contribution of New framework (B) (A*B) = (C) components CPIA 0.385 3.157 1.22 46% Cut-off values Real growth rate (in percent) 2.719 3.871 0.11 4% Weak CI < 2.69 Import coverage of reserves (in percent) 4.052 31.260 1.27 48% Medium 2.69 ≤ CI ≤ 3.05 Import coverage of reserves^2 (in percent) -3.990 9.772 -0.39 -15% Strong CI > 3.05 Remittances (in percent) 2.022 1.455 0.03 1% World economic growth (in percent) 13.520 2.909 0.39 15% CI Score 2.62 100% CI rating Weak 15 The composite indicator is calculated using data from the April 2024 WEO and the latest available 2022 CPIA. 16 Sensitivity analysis conducted by staff at the time of Staff Level Agreement in December 2021 showed that the Mopani mine would be financially viable even if copper prices fell to US$7,070 per metric ton and copper output only reached MT86,000. In that scenario, it would take ZCCM-IH until 2040 to repay the debt due to Glencore. However, the net cash flow would remain marginally positive after royalties and capex. On December 1, 2023, after a lengthy search, the authorities selected United Arab Emirates' International Resources Holdings (IRH) as the new strategic equity partner. 13 >>> 26. Under the baseline, all four external debt burden indicators breach their respective thresholds (Figure 1). The debt service-to-revenue ratio soars to a peak of 69 percent in 2024 given the large amount of debt service still falling due and the relatively low revenue base and remains well above the 14 percent threshold until 2031 (averaging about 25 percent in 2024-33). Similarly, the debt service- to-exports ratio peaks at around 28 percent in 2024 and only falls to the threshold of 10 percent in 2029 (averaging about 12 percent over 2024-33). On the stock side, the PV of PPG external debt-to-GDP averages about 44½ percent from 2024-33, falling below the prudent threshold of 30 percent only in 2035, 17 while the PV of PPG external debt-to-exports indicator also breaches the threshold at about 146 14F percent in 2023 (averaging about 95½ percent over 2024-33). 27. The thresholds for all four external debt indicators are breached by large margins under stress tests. The standardized exports shock is the most extreme for all external debt indicators, except the debt service-to-revenue ratio for which the combination shock is the most extreme. Under the standardized exports shock, the PV of PPG external debt-to-exports ratio peaks at 349 percent in 2026 and remains well above the threshold throughout the medium and long term. The market financing tool also points to significant vulnerabilities debt vulnerabilities in Zambia, although the relevance of this signal is reduced given Zambia has currently no access to international capital markets. 28. Under the baseline, the benchmark for the PV of total PPG debt-to-GDP is breached throughout the medium and long term (Figure 2). After peaking at 119 percent in 2023, the ratio remains elevated (at an average of about 67 percent from 2024-33), before finally falling below the threshold in 2038. The most extreme shock for this indicator is still the exports shock, which peaks at 108 percent in 2026. Similarly, the combined contingent liabilities shock, which accounts for risks from SOE debt, PPPs and the financial sector, is the most extreme shock for total debt service-to-revenues indicator, peaking at 103 percent in 2026. 29. Zambia remains in debt distress, and debt is deemed unsustainable in the absence of a debt treatment in line with program parameters for all commercial claims in the restructuring perimeter. This DSA update is based on the macroeconomic framework underpinning the third review, which entails significant fiscal adjustment over the medium term and incorporates the expected new financing of around US$3.5 billion from the IMF, World Bank (including grants), and the African Development Bank together over 2022-25. 18 Nevertheless, large financing gaps will remain over this period and would need to be filled 5F 17 Note the measurement of this indicator is complicated by the fact that the authorities are currently working on rebasing GDP; however, this work is not expected to be concluded until end-2025 at the earliest. 18 Total financing from the World Bank (including projected disbursements from existing commitments) amounts to about US$2.6 billion over 2022-25. New financing from new operations that were approved after the SLA and which contribute to reducing the BoP financing gap amounts to US$1.6 billion out of which about US$575 million will be provided in grants. 14 >>> through the completion of the debt restructuring operation in line with the DSA and IMF program parameters. 30. In the alternative restructuring scenario that considers the authorities’ restructuring strategy to reach agreements with all private creditors on treatments on comparable terms, Zambia’s would be assessed as sustainable on forward-looking basis. Under the restructuring scenario that incorporates the delivery of the state-contingent debt relief agreed within the framework of the G20 Common Framework, two alternative baselines might materialize depending on the evaluation of Zambia’s DCC at the end of the program period: • Under the scenario where Zambia remains assessed as weak DCC, the base case treatment will prevail (Text Figure 3). Under this alternative baseline, the PV of external debt-to-exports falls below the “substantial space to absorb shocks” threshold of 84 percent by 2027, while the debt service-to-revenue ratio falls below the 14 percent threshold by 2025 and remains below the 14 percent on average over 2026-31. Therefore the targets under the IMF-supported program are met, and Zambia’s debt would be assessed as sustainable with a moderate risk of external debt distress over the medium term, despite the protracted and large breach of the threshold by the PV of PPG external debt-to-GDP ratio indicator that averages about 36 percent from 2024-33, and only falls below the threshold of 30 percent in 2031. 19 In parallel, the external debt service-to- 6F exports indicator would remain well below its threshold, averaging 6½ percent over 2026-31 19 Note the measurement of this indicator is complicated by the fact that the authorities are currently working on rebasing GDP; however, this work is not expected to be concluded until end-2024 or even 2025. 15 >>> PV of debt-to GDP ratio PV of debt-to-exports ratio 160 400 140 350 120 300 100 250 80 200 60 150 40 100 20 50 Most extreme shock: Exports Most extreme shock: Exports 0 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Debt service-to-exports ratio Debt service-to-revenue ratio 30 90 80 25 70 20 60 50 15 40 10 30 20 5 10 Most extreme shock: Exports Most extreme shock: Exports 0 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Baseline Historical scenario Most extreme shock 1/ Threshold 1/ Includes the agreed treatments and the authorities’ strategy for the other commercial creditors. Sources: IMF staff projections based on the main elements of the agreed treatments and the authorities’ restructuring strategy. • Under a scenario where Zambia’s debt-carrying capacity is upgraded to medium, the Upside treatment will be triggered.20 Under this scenario, risks to Zambia’s debt sustainability are mitigated by the steady decline of the PV of external debt-to-exports that falls below the “substantial space to absorb shocks” threshold of 108 percent by 2027, while the external debt servic e-to-revenue ratio remains at about 18 percent on average over 2026-31. This mitigates the protracted and large breach of the threshold by the PV of PPG external debt-to-GDP ratio indicator, which averages about 43½ percent from 2024-33, and only falls below the threshold of 40 percent in 2030. In parallel, the external debt service-to-exports indicator remains well below its threshold, averaging 8½ percent over 2026-31. All external debt burden indicators do decline to levels consistent with Zambia reaching a moderate risk of external debt distress over the medium term (see Text Figure 4).21 20 Regarding the dual trigger of the state-contingent clause in the AIP with bondholders, a persistent overperformance in both US$ exports and the US$-equivalent of fiscal revenues relative to the second review macro-framework has been assessed to be highly correlated with an upgrade in the debt carrying capacity . 21 The temporary breaches beyond 2031 of the external debt service-to-revenues ratio are judged to be distant and marginal. They are mitigated by the fact that in a scenario where the debt carrying capacity were to be upgraded, the medium-term outlook would also be more favorable in terms of revenues performance than currently assumed under the baseline. 16 >>> PV of debt-to GDP ratio PV of debt-to-exports ratio 180 450 160 400 140 350 120 300 100 250 80 200 60 150 40 100 20 50 Most extreme shock: Exports Most extreme shock: Exports 0 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Debt service-to-exports ratio Debt service-to-revenue ratio 50 90 45 80 40 70 35 60 30 50 25 40 20 30 15 20 10 5 10 Most extreme shock: Exports Most extreme shock: Exports 0 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Baseline Historical scenario Most extreme shock 1/ Threshold 1/ Includes the agreed treatments and the authorities’ strategy for the other commercial creditors. Sources: IMF staff projections based on the main elements of the agreed treatments and the authorities’ restructuring strategy. 31. Risks to the debt outlook are significant. This DSA is predicated on the Zambian authorities’ commitment under their program to undertake credible steps to restore medium-term debt sustainability, including to restore macroeconomic stability and achieve higher economic growth. Delays or slippages in fiscal policy adjustment, or weather-related and external shocks that impact the macroeconomic framework, could significantly impact the debt trajectory. These risks are mitigated by the authorities’ track record of implementing robust policy reforms since coming to power in August 2021. 32. Other reforms to support debt sustainability following the debt restructuring are also in train and further mitigate risks. To strengthen the institutional framework, the authorities adopted a new Public Debt Management Act in August 2022. 22 This provides greater oversight on the contracting of debt. 17F This will be supported by ongoing efforts to strengthen public financial management more broadly and to strengthen debt transparency, as well as plans to modernize and strengthen capacity of the debt management unit. 33. The authorities shared staff’s assessment of their debt sustainability and emphasized their commitment to completing the debt restructuring operation of their external debt in line with DSA 22 The adoption of the Public Debt Management Act was supported under the IMF program and IDA’s Sustainable Debt Financing Policy. 17 >>> and IMF program parameters. The authorities highlighted that an agreement in principle has been reached with the Eurobonds’ holders on March 25, 2024, which is expected to be implemented by end - June, while the work on signing the bilateral agreements with official creditors was advancing well. The authorities also emphasized their commitment to reach restructuring agreements with other external creditors on comparable terms and consistent with IMF-program parameters. The authorities agreed that once these agreements were implemented debt sustainability would be restored. 18 >>> PV of debt-to GDP ratio PV of debt-to-exports ratio 140 400 120 350 300 100 250 80 200 60 150 40 100 20 50 Most extreme shock: Exports Most extreme shock: Exports 0 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Debt service-to-exports ratio Debt service-to-revenue ratio 40 90 35 80 70 30 60 25 50 20 40 15 30 10 20 5 10 Most extreme shock: Exports Most extreme shock: Combination 0 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Baseline Historical scenario Most extreme shock 1/ Threshold Customization of Default Settings Borrowing assumptions on additional financing needs resulting from the stress tests* Size Interactions Default User defined Shares of marginal debt No No External PPG MLT debt 100% Tailored Stress Terms of marginal debt Combined CL Yes Avg. nominal interest rate on new borrowing in USD 4.2% 4.2% Natural disaster n.a. n.a. USD Discount rate 5.0% 5.0% Commodity price 2/ No No Avg. maturity (incl. grace period) 27 27 Market financing No No Avg. grace period 10 10 Note: "Yes" indicates any change to the size or interactions of * Note: All the additional financing needs generated by the shocks under the stress tests are the default settings for the stress tests. "n.a." indicates that the assumed to be covered by PPG external MLT debt in the external DSA. Default terms of marginal stress test does not apply. debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2034. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 19 >>> PV of Debt-to-GDP Ratio 120 100 80 60 40 20 Most extreme shock: Exports 0 2024 2026 2028 2030 2032 2034 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 600 140 120 500 100 400 80 300 60 200 40 100 Most extreme shock: Combined contingent liabilities Most extreme shock: Exports 20 0 0 2024 2026 2028 2030 2032 2034 2024 2026 2028 2030 2032 2034 Baseline Most extreme shock 1/ TOTAL public debt benchmark Historical scenario Borrowing assumptions on additional financing needs resulting from the stress Default User defined tests* Shares of marginal debt External PPG medium and long-term 38% 38% Domestic medium and long-term 28% 28% Domestic short-term 34% 34% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 4.2% 4.2% Avg. maturity (incl. grace period) 27 27 Avg. grace period 10 10 Domestic MLT debt Avg. real interest rate on new borrowing 5.5% 5.5% Avg. maturity (incl. grace period) 6 6 Avg. grace period 5 5 Domestic short-term debt Avg. real interest rate 1.1% 1.1% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2034. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 20 >>> Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (In Percent of GDP; DSA vintages) (In Percent of GDP) (In Percent of GDP, past 5 years) 150 Current DSA proj. 100 120 Residual Previous DSA 80 DSA-2019 100 Interquartile 100 range (25-75) 60 Price and exchange rate 50 80 40 Real GDP 20 Change in PPG growth 0 60 debt 3/ 0 Nominal 40 interest rate -50 -20 Median -40 20 Current -100 account + FDI -60 0 -150 Contribution of unexpected 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Change in PPG debt 3/ 5-year 5-year changes Distribution across LICs 2/ historical projected change change Public Debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (In Percent of GDP; DSA vintages) (In Percent of GDP) (In Percent of GDP, past 5 years) 150 Current DSA Residual 100 Previous DSA proj. DSA-2019 Interquartile 180 100 range (25-75) Other debt 80 creating flows 160 140 50 Real 60 Exchange rate 120 depreciation 0 100 Real GDP 40 Change in debt growth 80 -50 60 Real interest 20 rate 40 -100 Primary deficit 0 20 Median 0 Contribution of -20 Distribution across LICs 2/ 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Change in debt unexpected changes 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 21 >>> 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (In Percent of GDP) Distribution 1/ 8 4 14 12 Projected 3-yr adjustment 6 3 3-year PB adjustment greater than 2.5 percentage points of In percentage points of GDP 10 GDP in approx. top quartile 4 2 8 In percent 2 1 6 0 0 4 2 -2 -1 0 -4 -2 more -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 2018 2019 2020 2021 2022 2023 2024 2025 Baseline Multiplier = 0.2 Multiplier = 0.4 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. The 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is possible real GDP growth paths under different fiscal multipliers (left-hand side scale). found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (In Percent of GDP) (In Percent, 5-year average) 30 6 28 26 5 24 22 20 4 18 16 3 14 12 10 2 8 6 1 4 2 0 0 Historical Projected (Prev. DSA) Projected (Curr. DSA) 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Gov. Invest. - Prev. DSA Gov. Invest. - Curr. DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Curr. DSA Contribution of government capital 22 >>> GFN 1/ EMBI 2/ Benchmarks 14 570 Values 25 5000 Breach of benchmark Yes Yes Potential heightened liquidity needs High 1/ Maximum gross financing needs (GFN) over 3-year baseline projection horizon. 2/ EMBI spreads correspond to the latest available data. 70 PV of debt-to GDP ratio PV of debt-to-exports ratio 160 60 140 50 120 40 100 80 30 60 20 40 10 20 0 0 2024 2026 2028 2030 2032 2034 2024 2026 2028 2030 2032 2034 Debt service-to-exports ratio Debt service-to-revenue ratio 30 80 70 25 60 20 50 15 40 30 10 20 5 10 0 0 2024 2026 2028 2030 2032 2034 2024 2026 2028 2030 2032 2034 Baseline Market financing Threshold Sources: Country authorities; and staff estimates and projections. 23 >>> Actual Projections Average 8/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2034 2039 Historical Projections External debt (nominal) 1/ 113.5 105.8 127.1 108.1 88.6 76.0 69.7 63.9 61.8 43.0 44.2 94.4 65.7 Definition of external/domestic debt Residency-based of which: public and publicly guaranteed (PPG) 75.9 76.7 97.5 76.7 63.9 55.4 52.1 48.3 46.3 34.3 24.4 60.5 48.9 Is there a material difference between the Yes two criteria? Change in external debt -36.5 -7.7 21.4 -19.1 -19.5 -12.6 -6.3 -5.8 -2.1 -3.1 -0.6 Identified net debt-creating flows -42.2 -29.9 4.0 -6.7 -16.5 -14.7 -14.4 -13.8 -13.4 -12.4 -10.6 -6.9 -12.9 Non-interest current account deficit -19.1 -8.7 -1.4 -2.4 -9.0 -7.7 -8.0 -7.9 -7.8 -7.1 -6.2 -4.6 -7.1 Deficit in balance of goods and services -18.3 -8.3 -2.1 -6.9 -13.7 -12.5 -12.2 -11.9 -11.7 -11.2 -9.0 -1.9 -11.4 Exports 53.1 42.7 40.7 49.6 49.6 46.7 45.6 45.3 45.1 44.3 35.1 Debt Accumulation Imports 34.8 34.4 38.6 42.7 35.9 34.2 33.4 33.4 33.4 33.1 26.1 5.0 35 Net current transfers (negative = inflow) -1.4 -1.0 -0.9 -2.0 -1.4 -0.9 -0.9 -0.9 -0.8 -0.8 -0.7 -1.1 -1.0 of which: official 0.0 0.0 -0.5 -1.4 -0.8 -0.4 -0.4 -0.4 -0.3 -0.3 -0.3 4.5 30 Other current account flows (negative = net inflow) 0.5 0.6 1.6 6.5 6.0 5.8 5.0 5.0 4.7 4.9 3.5 -1.6 5.3 4.0 Net FDI (negative = inflow) -3.1 -0.6 0.1 -3.8 -3.8 -4.5 -4.3 -4.3 -4.3 -4.3 -3.4 -3.1 -4.2 3.5 25 Endogenous debt dynamics 2/ -20.0 -20.6 5.3 -0.5 -3.7 -2.5 -2.1 -1.6 -1.3 -1.0 -0.9 Contribution from nominal interest rate 7.2 4.9 3.3 2.7 2.2 1.9 1.7 1.7 1.6 1.0 1.1 3.0 20 Contribution from real GDP growth -7.7 -4.5 -5.9 -3.2 -5.8 -4.5 -3.8 -3.3 -2.9 -2.0 -2.0 2.5 Contribution from price and exchange rate changes -19.6 -21.0 7.9 … … … … … … … … 15 Residual 3/ 5.7 22.2 17.4 -12.3 -3.0 2.1 8.1 8.0 11.3 9.3 10.0 17.5 5.3 2.0 of which: exceptional financing -10.1 -8.0 -5.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 10 1.0 Sustainability indicators 5 PV of PPG external debt-to-GDP ratio ... ... 59.4 65.3 56.7 49.3 45.2 42.5 41.1 30.8 22.0 0.5 PV of PPG external debt-to-exports ratio ... ... 146.1 131.7 114.4 105.6 99.2 93.8 91.2 69.5 62.6 0.0 0 PPG debt service-to-exports ratio 25.9 28.8 19.3 28.1 14.7 16.1 12.4 10.0 6.4 4.8 6.4 2024 2026 2028 2030 2032 2034 PPG debt service-to-revenue ratio 63.1 61.6 38.4 69.0 34.2 34.6 25.9 20.2 12.8 9.4 10.0 Gross external financing need (Million of U.S. dollars) -697.6 1348.8 2571.6 2757.4 -853.4 -734.3 -1727.4 -2325.0 -4084.4 -4776.0 -8727.6 Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 6.2 5.2 5.4 2.3 6.6 5.9 5.6 5.1 4.9 4.8 4.9 3.4 4.9 GDP deflator in US dollar terms (change in percent) 14.7 25.2 -8.2 -10.1 15.2 9.2 5.9 2.9 2.5 2.8 2.9 -2.0 3.6 Effective interest rate (percent) 4/ 5.9 5.7 3.1 1.9 2.5 2.5 2.5 2.6 2.8 2.4 2.6 3.1 2.5 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 37.0 6.1 -8.0 12.2 22.8 8.9 9.1 7.5 7.0 7.3 0.0 1.4 9.4 of which: Private Growth of imports of G&S (US dollar terms, in percent) -4.3 30.3 8.3 1.9 3.3 10.2 9.1 8.1 7.6 7.2 0.0 2.9 7.0 120 Grant element of new public sector borrowing (in percent) ... ... ... 16.3 18.0 11.6 11.1 7.2 18.6 24.5 25.2 ... 19.7 Government revenues (excluding grants, in percent of GDP) 21.8 20.0 20.4 20.2 21.4 21.7 21.8 22.3 22.4 22.5 22.5 19.3 22.0 100 Aid flows (in Million of US dollars) 5/ 262.5 226.4 373.2 753.3 910.3 581.6 570.1 341.5 607.0 712.8 798.7 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 3.4 2.4 1.0 0.9 0.6 0.9 0.8 0.7 ... 1.3 80 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 23.1 25.2 17.9 17.3 18.0 27.5 34.4 39.1 ... 28.1 Nominal GDP (Million of US dollars) 22,096 29,122 28,163 25,913 31,832 36,811 41,141 44,482 47,826 69,093 100,738 Nominal dollar GDP growth 21.8 31.8 -3.3 -8.0 22.8 15.6 11.8 8.1 7.5 7.7 7.9 1.6 8.7 60 Memorandum items: 40 PV of external debt 7/ ... ... 89.1 96.7 81.4 69.9 62.9 58.1 56.6 39.4 41.7 In percent of exports ... ... 219.1 195.0 164.3 149.8 138.0 128.2 125.4 89.1 118.7 20 Total external debt service-to-exports ratio 35.9 32.6 25.7 34.0 20.4 21.7 17.9 15.4 8.0 10.1 2.8 PV of PPG external debt (in Million of US dollars) 16739.4 16923.5 18046.1 18151.0 18589.3 18908.0 19666.8 21259.9 22153.4 0 (PVt-PVt-1)/GDPt-1 (in percent) 0.7 4.3 0.3 1.2 0.8 1.7 1.1 -0.1 2024 2026 2028 2030 2032 2034 Non-interest current account deficit that stabilizes debt ratio 17.4 -1.0 -22.8 16.6 10.4 4.9 -1.7 -2.0 -5.7 -4.0 -5.6 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 24 >>> Actual Projections Average 6/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2034 2039 Historical Projections Public sector debt 1/ 128.4 122.1 141.1 112.1 90.8 81.0 75.7 70.9 66.9 47.5 35.5 85.6 70.1 Definition of external/domestic Residency- of which: external debt 75.9 76.7 97.5 76.7 63.9 55.4 52.1 48.3 46.3 34.3 24.4 60.5 48.9 debt based of which: local-currency denominated Change in public sector debt -29.2 -6.4 19.0 -29.0 -21.3 -9.8 -5.3 -4.8 -4.1 -3.3 -2.0 Is there a material difference Identified debt-creating flows -42.7 0.6 16.5 -16.1 -20.6 -9.3 -4.3 -4.3 -3.7 -3.1 -2.0 3.0 -6.8 Yes between the two criteria? Primary deficit (cash basis) 3.6 1.6 -0.6 0.7 -2.5 -2.3 -2.0 -1.9 -1.9 -1.3 -0.6 1.1 -1.6 Revenue and grants 22.4 20.4 21.5 21.4 21.8 21.8 21.9 22.5 22.4 22.7 22.7 19.8 22.3 of which: grants 0.6 0.4 1.1 1.2 0.8 0.4 0.4 0.4 0.3 0.3 0.3 Public sector debt 1/ Primary (noninterest) expenditure 24.4 22.0 20.9 22.1 19.7 19.9 20.2 20.8 20.8 21.5 22.2 20.7 20.9 Automatic debt dynamics -46.3 -1.0 17.1 -16.7 -18.0 -7.1 -2.4 -2.4 -1.8 -1.8 -1.4 of which: local-currency denominated Contribution from interest rate/growth differential -11.6 -3.7 -4.3 -8.6 -5.7 -2.9 -2.2 -1.9 -1.6 -1.5 -1.2 of which: foreign-currency denominated of which: contribution from average real interest rate -2.3 2.7 2.0 -5.4 1.3 2.1 2.0 1.7 1.7 0.8 0.6 of which: contribution from real GDP growth -9.3 -6.4 -6.3 -3.2 -7.0 -5.0 -4.3 -3.7 -3.3 -2.3 -1.7 120 Contribution from real exchange rate depreciation -34.7 2.6 21.4 ... ... ... ... ... ... ... ... 100 Other identified debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 80 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 60 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Residual 13.5 -6.9 2.5 -21.1 -13.1 -4.7 -1.1 -0.9 -0.6 -0.4 -0.2 9.1 -4.1 20 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 119.2 102.0 82.4 74.0 69.6 65.9 62.4 44.4 33.4 2024 2026 2028 2030 2032 2034 PV of public debt-to-revenue and grants ratio … … 555.9 476.8 370.8 335.0 313.9 290.0 274.8 194.5 146.6 Debt service-to-revenue and grants ratio 3/ 126.6 118.4 65.1 116.7 78.9 73.3 66.2 54.1 48.5 31.3 27.0 Gross financing need 4/ 30.4 25.7 13.4 24.8 15.3 14.2 12.9 10.5 9.2 5.8 5.5 of which: held by residents of which: held by non-residents Key macroeconomic and fiscal assumptions 120 Real GDP growth (in percent) 6.2 5.2 5.4 2.3 6.6 5.9 5.6 5.1 4.9 4.8 4.9 3.4 4.9 Average nominal interest rate on external debt (in percent) 5.2 6.4 4.2 3.2 3.5 3.4 3.4 3.6 3.7 3.2 3.4 5.0 3.4 100 Average real interest rate on domestic debt (in percent) -10.7 0.1 1.5 -12.6 0.6 6.7 7.2 5.7 5.7 4.1 2.8 7.8 3.2 80 Real exchange rate depreciation (in percent, + indicates depreciation) -36.4 4.2 33.0 … ... ... ... ... ... ... ... 10.7 ... 60 Inflation rate (GDP deflator, in percent) 25.1 6.1 9.3 20.2 9.9 5.0 5.9 6.6 6.2 6.4 6.6 10.5 7.8 Growth of real primary spending (deflated by GDP deflator, in percent) 25.4 -5.3 0.0 8.2 -4.8 6.7 7.5 8.2 4.8 4.5 5.5 5.6 5.3 40 Primary deficit that stabilizes the debt-to-GDP ratio 5/ 32.8 7.9 -19.6 29.7 18.8 7.6 3.3 2.9 2.2 2.0 1.4 -11.0 6.9 20 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 2024 2026 2028 2030 2032 2034 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government plus social security, central bank, government-guaranteed debt, non-guaranteed SOE debt . Definition of external debt is Residency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 25 >>> Projections 1/ 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 PV of debt-to GDP ratio Baseline 65 57 49 45 43 41 40 37 34 32 31 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 65 74 78 84 90 96 101 106 111 117 124 A2. Alternative Scenario : Contingent Liabilities + FX debt 65 69 62 58 55 54 52 50 48 46 44 B. Bound Tests B1. Real GDP growth 65 62 58 53 50 48 47 43 40 38 36 B2. Primary balance 65 59 55 51 48 47 45 43 41 39 37 B3. Exports 65 76 93 86 82 80 77 73 69 66 63 B4. Other flows 3/ 65 61 58 53 50 48 47 44 41 38 37 B5. Depreciation 65 67 59 54 51 49 47 44 41 38 37 B6. Combination of B1-B5 65 78 78 72 69 67 64 61 58 55 53 C. Tailored Tests C1. Combined contingent liabilities 65 63 57 53 51 49 48 46 44 42 41 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 65 62 59 56 55 54 53 51 49 47 46 C4. Market Financing 65 62 54 50 48 46 44 41 38 35 33 Threshold 30 30 30 30 30 30 30 30 30 30 30 PV of debt-to-exports ratio Baseline 132 114 106 99 94 91 88 82 77 72 69 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 132 149 168 184 198 212 225 236 249 263 280 A2. Alternative Scenario : Contingent Liabilities + FX debt 132 138 133 127 121 119 116 112 108 103 100 B. Bound Tests B1. Real GDP growth 132 114 106 99 94 91 88 82 77 72 69 B2. Primary balance 132 118 118 112 107 104 101 96 91 87 84 B3. Exports 132 214 349 331 316 308 298 283 270 257 249 B4. Other flows 3/ 132 123 123 116 110 107 104 97 92 87 84 B5. Depreciation 132 110 103 97 92 89 86 80 75 70 68 B6. Combination of B1-B5 132 187 140 210 200 196 190 180 171 163 158 C. Tailored Tests C1. Combined contingent liabilities 132 128 122 117 112 109 106 103 99 94 92 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 132 135 136 130 125 123 120 115 110 106 105 C4. Market Financing 132 114 106 100 95 93 89 82 77 71 68 Threshold 140 140 140 140 140 140 140 140 140 140 140 Debt service-to-exports ratio Baseline 28 15 16 12 10 6 7 9 7 6 5 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 28 18 23 20 18 13 15 21 17 18 16 A2. Alternative Scenario : Contingent Liabilities + FX debt 28 15 17 14 11 8 8 11 8 8 6 B. Bound Tests B1. Real GDP growth 28 15 16 12 10 6 7 9 7 6 5 B2. Primary balance 28 15 16 13 11 7 7 10 7 7 5 B3. Exports 28 22 34 30 25 18 19 24 18 17 14 B4. Other flows 3/ 28 15 16 13 11 7 7 10 7 7 5 B5. Depreciation 28 15 16 12 10 6 7 9 6 6 5 B6. Combination of B1-B5 28 20 28 23 19 13 13 18 13 13 10 C. Tailored Tests C1. Combined contingent liabilities 28 15 17 13 11 7 7 10 7 7 6 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 28 16 18 15 12 8 8 11 8 8 6 C4. Market Financing 28 15 16 13 11 10 13 15 9 6 5 Threshold 10 10 10 10 10 10 10 10 10 10 10 Debt service-to-revenue ratio Baseline 69 34 35 26 20 13 13 19 13 12 9 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 69 41 49 42 36 26 29 42 34 35 31 A2. Alternative Scenario : Contingent Liabilities + FX debt 69 34 37 28 23 15 16 21 15 15 12 B. Bound Tests 69 34 37 28 23 15 16 21 15 15 12 B1. Real GDP growth 69 37 41 30 24 15 16 22 15 14 11 B2. Primary balance 69 34 35 27 22 14 15 20 14 14 11 B3. Exports 69 37 42 36 30 21 21 27 20 20 16 B4. Other flows 3/ 69 34 35 27 22 14 15 20 14 14 11 B5. Depreciation 69 42 42 31 24 15 16 22 16 15 11 B6. Combination of B1-B5 69 39 45 36 29 20 20 26 20 19 15 C. Tailored Tests C1. Combined contingent liabilities 69 34 36 27 22 14 15 20 15 14 11 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 69 38 40 31 25 16 17 22 16 15 12 C4. Market Financing 69 34 35 27 22 21 26 29 18 12 9 Threshold 14 14 14 14 14 14 14 14 14 14 14 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 26 >>> Projections 1/ 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 PV of Debt-to-GDP Ratio Baseline 102 82 74 70 66 62 58 54 51 47 44 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 102 88 81 77 74 71 68 65 62 59 57 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 102 92 94 92 91 91 89 88 87 87 87 B2. Primary balance 102 88 86 81 77 73 69 65 61 58 54 B3. Exports 102 97 108 102 97 93 88 83 78 74 70 B4. Other flows 3/ 102 87 82 78 73 70 65 61 57 54 51 B5. Depreciation 102 104 92 86 81 76 70 65 60 56 52 B6. Combination of B1-B5 102 87 86 82 79 77 74 71 68 65 63 C. Tailored Tests C1. Combined contingent liabilities 102 101 92 87 82 79 74 70 66 62 59 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 102 88 82 81 81 81 80 79 79 79 79 C4. Market Financing 102 82 74 70 67 63 59 55 51 47 44 TOTAL public debt benchmark 35 35 35 35 35 35 35 35 35 35 35 PV of Debt-to-Revenue Ratio Baseline 477 371 335 314 290 275 256 238 222 208 194 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 477 398 365 347 327 315 300 284 272 260 250 0 117 72 68 62 53 49 47 49 44 44 41 B. Bound Tests B1. Real GDP growth 477 415 423 414 400 398 391 385 381 379 378 B2. Primary balance 477 395 389 365 339 323 303 284 268 252 238 B3. Exports 477 436 487 460 428 409 385 363 343 325 308 B4. Other flows 3/ 477 389 372 349 323 307 287 268 252 236 222 B5. Depreciation 477 468 417 387 356 335 309 286 265 246 228 B6. Combination of B1-B5 477 392 388 370 349 339 323 309 297 286 277 C. Tailored Tests C1. Combined contingent liabilities 477 454 414 390 363 346 326 306 289 273 259 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 477 425 400 394 376 369 357 347 345 345 346 C4. Market Financing 477 371 336 316 293 278 258 239 221 206 192 Debt Service-to-Revenue Ratio Baseline 117 79 73 66 54 48 42 42 37 35 31 A. Alternative Scenarios A1. Key variables at their historical averages in 2024-2034 2/ 117 81 74 66 53 47 42 44 37 36 31 0 117 72 68 62 53 49 47 49 44 44 41 B. Bound Tests B1. Real GDP growth 117 86 89 85 73 69 64 67 64 65 62 B2. Primary balance 117 79 82 79 61 54 47 50 46 43 37 B3. Exports 117 79 76 73 60 54 47 48 42 41 36 B4. Other flows 3/ 117 79 74 68 56 50 43 44 38 37 33 B5. Depreciation 117 82 86 78 64 55 48 51 45 43 37 B6. Combination of B1-B5 117 79 79 73 62 58 52 53 48 47 44 C. Tailored Tests C1. Combined contingent liabilities 117 79 103 80 63 56 49 61 51 45 39 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 117 87 79 72 66 62 57 58 53 57 56 C4. Market Financing 117 79 74 67 56 57 54 53 42 35 31 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 27 >>>