The International Monetary Fund wants official creditors - which met on Tuesday - to outline in a Memorandum of Understanding (MOU) with the government specific modalities of how they intend to deliver debt relief aligned with the framework of a $1.3 billion 38-month program signed off by the fund's board in August 2022.
Modalities of debt relief could come in various forms, for example maturity extensions, grace periods on payments or reduced interest rates.
"There was progress and the next meeting is in two or three weeks time and MOU is expected to be signed," one of the sources familiar with the matter said on condition of anonymity.
"Agreement was reached on nearly all the issues that were holding back progress and the MoU is likely to be signed next month," a second source said.
The government reached a preliminary deal on the first review of the program with the fund during a staff visit which ended in early April, but needs the executive board to sign off the deal for funds to be deployed.
Zambia is hoping for more than $8 billion of debt relief in a restructuring widely seen as both a key test case of the G20's Common Framework vehicle and Beijing’s willingness to swallow losses on loans it has extended to poorer countries.
Zambia has been in default since 2020 when it became one of the first major sovereign casualties of the COVID-19 pandemic era, though progress in overhauling its debt burden has been slow. Zambia's external debt amounted to $18.6 billion by end-2022, according to government data, with China being its biggest bilateral creditor.