Economist Chibamba Kanyama says International Monetary Fund (IMF) bailout packages acquired ahead of general elections are tricky, as they usually unseat African governments because voters vote against the tight austerity measures which come with the programme.
But Kanyama has, however, observed that the Zambian government does not have the 2021 elections in mind in their quest to secure a much-needed IMF programme.
In an interview with News Diggers! in Lusaka, Kanyama said African governments are usually unseated with an IMF programme if accepted ahead of general elections because voters vote against tight austerity measures the bailout package will introduce.
“There is no question an IMF programme comes with conditionalities. These conditionalities may include; tight fiscal management that affects both resource mobilisation and spending. Resource mobilisation may include an adjustment in the tax policy. The expenditure side may involve serious austerity measures, such as a reduction in all forms of subsidies; rein in on general wage bills and possibly tightening of the monetary policy. Given the high level of infrastructure investments in the country, much of it financed by debt, any government would be quite unsettled with an IMF programme,” Kanyama said.
“IMF itself has called for a containment on infrastructural investments in view of the debt position. Election periods are a determining factor when considering an IMF programme. Generally, as has been experienced in most parts of Africa, governments that introduce IMF programmes during an election period are unseated. Voters may be voting against austerity and will in the process throw out the baby with bath water.”
But Kanyama has observed that the PF government, however, does not have the 2021 general election in mind in their quest to secure the much-needed IMF programme anticipated to be around US $1.3 billion for balance of payments support.
“In the Zambian context, I do not think government has the 2021 elections in mind when considering the IMF programme. First, whether or not we have the IMF, the economy currently requires fiscal consolidation so that we have sufficient borrowing headroom in the future. Zambia needs to strongly insulate itself against the external spill over economic challenges. For example, our reserves are totally dependent on copper sales and this should be managed because as things stand, any drop in the price of copper, we have all forms of instabilities including the exchange rate movements. Second, government has so far demonstrated it is not scared of the public backlash emerging from austerity measures,” Kanyama added.
“Consider the removal of street vendors, which we all thought would not be done as it was a huge risk on the popularity of government. That experience alone shows us government has the capacity to contain the unanticipated consequences of IMF conditionalities. Third, I do not think the IMF programme will introduce anything new in terms of conditionalities beyond what government has already done. The removal and rationalisation of subsidies on fuel, agriculture inputs and energy emanate from Article IV advice by the IMF. In short, government has in effect applied most of those conditionalities without receiving IMF money.”
He added that the IMF has softened their traditional uncompromising stance over the years, signalling that Zambia has a higher chance of securing the programme.
“It is also important to note that IMF is no longer that ‘bulldozing’ and uncompromising lender. Its approach has changed greatly over the years in favour of negotiation and engagement. In the Ghanaian experience four years ago, civil society, such as Oxfam, played a big role in structuring an IMF programme in that country. Even that picture you took of Finance Minister Margaret Mwanakatwe posing with the IMF team that recently visited Zambia told a lot about how IMF has reformed; those guys will be sharing that picture with their colleagues in Washington, DC because now, it is the borrowing countries that have more leverage on the negotiating table than the IMF itself,” said Kanyama.
An IMF team visited Zambia last week and have since concluded their mission visit after having exchanged information on economic data with the Zambian government.
The Team were here to exchange information on economic data that will facilitate the development of a macroeconomic framework for use during the Article 4 Consultations, in the first quarter of 2019, according to Minister of Finance Margaret Mwanakatwe.
In July this year, 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.