The International Monetary Fund’s (IMF) suspension of Zambia’s economic bailout package implies that the Fund is still not confident with Zambia’s commitment to the programme, economist Chibamba Kanyama has observed.
And Kanyama, the Bridges Limited executive director, recommended that Zambia immediately implements self-imposed austerity measures including freezing salary increments and halting construction projects, among others, to secure a package.
Last Thursday, the IMF revealed that talks on Zambia’s economic bailout package, widely expected to be around US $1.3 billion, have been suspended owing to concerns surrounding the country’s debt sustainability.
Speaking during a press briefing from the Fund’s head office in Washington D.C. on July 12, IMF communications director Gerry Rice disclosed that the Fund had suspended discussions on a possible economic bailout programme because the Zambian government’s borrowing plans had compromised the country’s debt sustainability, which in-turn, would undermine Zambia’s macroeconomic stability.
Commenting on the development in an interview in Lusaka, Monday, Kanyama observed the failure to reconcile data between the IMF and the Zambian government led to the fallout of the programme.
“And there are two things that maybe [is] on the mind of the IMF. The first one is whether Zambia itself is fully committed to the IMF programme. Whether it is the current [Finance] Minister or the Minister before, I’m sure they have some kind of doubts in them. Some kind of doubts whether Zambia is fully committed because there is some Chinese financing that was coming on board and they perceived that, maybe, Zambia was not fully committed to the IMF programme and at that time, there were some statements being issued and IMF took kind of seriously some of the issues that [were] being said like, ‘we don’t need the IMF.’ So, I know that they took those statements carefully, they read them carefully, they may not have issued a statement, but from what I know, they studied those statements as to whether there was a full commitment to the programme,” Kanyama told News Diggers!
“Number two is reconciliation of data. Data has been the biggest problem because filling is not only about the data to do with external debts, or internal or domestic debts, it’s just about data of almost everything. IMF came here last year; they came up with their own data. And they felt the data that they had and the data that was available with government was not reconciling. And that dragged on and in fact that is what put off the whole process. The data was not reconciled. The implications are such that the bond-holders, the investors are increasingly anxious. They are all focused on an IMF programme. To them, there is no other choice for Zambia apart from an IMF [programme]. These are bond-holders those who got into the Eurobond and other credit-holders to Zambia. They are all watching.”
He also said Zambia needed cash to help with its balance of payments, and observed that China would never give out cash to the country.
“There is no other way right now, and ask anybody, Zambia does not need Chinese money right now. The money that Zambia needs is actual cash. It’s actual money for the balance of payments support, that is the money Zambia is looking for. Zambia can never get cash from China! So, China can never be a solution to the issues affecting the financial position of the country. China will never be a solution because China will never give you cash. China will never give you money to put in the Bank of Zambia. So, the only debt that we need right now is what we call concessional debt. This is debt that comes at 0.5 per cent or zero interest [rate]. That is the debt we need right now,” he said.
Kanyama, the former IMF Communications Advisor, also regretted that the Fund seemed to be giving up on Zambia.
“It is very unfortunate that the IMF has come out that way. I have to read through the statement to appreciate how my boss said [it], because I mean, I was reporting to Gerry Rice directly. I know how he talks and I know that the information he gave was very carefully collaborated within the IMF, extremely carefully collaborated. If there is an institution that is highly-diplomatic in issuing public statements in the world, IMF is number one. What surprised me is that, when that statement was issued, it was stronger than I had anticipated, and it really spoke through some issues and I began to think as to what may have happened,” Kanyama said.
He also recalled how former IMF head of mission Tsidi Tsikata had endeavoured to deliver an IMF package for Zambia.
“He is a Ghanaian national, but he had personally wanted to deliver a programme to Zambia. He really negotiated, despite being an employee of the IMF, he wanted Zambia to get a very fair deal. He understood fully the challenges that the country was facing. He even made personal efforts to meet President Lungu in 2015 at State House to really negotiate to allay any fears to the Head of State that an IMF programme would bring untold misery and suffering. So, he delayed his retirement as far as I know, he delayed his retirement a few months thinking that at some point, Zambia’s [IMF] programme would succeed. Unfortunately, it could just not work,” he recalled.
Kanyama recommended self-imposed austerity measures for Zambia.
“IMF wants to ensure that government is serious about the self-induced austerity measures. IMF is not concerned about travel. What IMF wants are the actual indicators. So, they want an indicator of how much borrowing are you going to make from the domestic market going forward? How much external borrowing are you doing going forward? How much salary increments are going to give to the civil servants going forwards? Those are the benchmarks they want to hear. They want to hear, ‘we will shut off all construction projects and infrastructure projects’ and ‘everything has been frozen.’ That is what they want to hear,” observed Kanyama.
“They want to hear that you will start building of foreign reserves and once those measures are taken and communicated to them, the IMF will come and say, ‘can we talk?’ And I am very confident that government can do that.”