ZAMBIA’s huge indebtedness and failure to attain debt sustainability to attract an IMF programme means that the country must solve the economic crisis without external assistance, says Party of National Unity (PNU) leader Highvie Hamududu.
Commenting on Bank of Zambia’s (BoZ) governor Dr Denny Kalyalya’s observation that Zambia remained a long way from attaining debt sustainability due to the huge level of indebtedness, Hamududu said that there was no chance the country would ever clinch a much-needed International Monetary Fund (IMF) bailout package as Zambia’s debt remained unsustainable.
He observed that Zambia’s failure to adopt an IMF-backed programme, which was expected to be around US $1.3 billion for balance of payments support, was also down to government’s failure to improve its fiscal position.
“The IMF will not come! IMF coming is dependent on satisfactory domestic reforms. So, the recovery of the economy can only be underpinned, firstly, by domestic structural reforms. What the Bank of Zambia is saying is that the solution lies in the fiscal policy; it lies with those who manage the fiscal policy at the Ministry of Finance; they must put in place measures that will bring about reforms, domestically. IMF is not coming and it will only come if number one: we improve the fiscal discipline in government; we reduce the leakages in government; we have an efficient civil service. Number two: we must put in place satisfactory reforms that are envisaged to produce results. So, IMF comes to ride on that. IMF will only come when our policies are viable,” Hamududu said in an interview.
“IMF is a financial institution just like the World Bank; can a bank give you a loan if your proposal is not viable? The current economic recovery programme is not viable, it needs up-scaling. IMF cannot come and ride on something they know won’t work. So, we have more work to do domestically here. Government should go back to the drawing board, re-craft the economic recovery programme, it is not working! That is why the exchange rate is worsening; that is why the inflation rate is going up; all the fundamentals are showing that there is something that we are not doing right. The IMF is looking for a total package of economic reforms, holistic reforms. If that is done in 12 months, IMF can sit on the table.”
Hamududu observed that the current tension engulfing the country was driven by a poor-performing economy.
“The tension that is in the country is driven by a bad economy; it is becoming fertile for the manner of agitation and all manner of schemes. So, just basically the common denominator in any country is the economy; our people’s concern is the economy; if the economy becomes bad, you know you see all these problems shooting up because of the bad economy. The Bank of Zambia has done well; they have a role to play to tone down some of the monetary instances; but you see, they have a limit. If the real economy is not growing, there must be growth in the real economy and that should happen with those who implement the fiscal policy, which itself can create stimulation of the economy because the economy is not being stimulated,” Hamududu observed.
He advised government not to focus exclusively on winning the next election, but implement urgent economic reforms.
“Elections do not stop an economy from reforms; economic reforms must not recognize elections. Economic trajectory must not be tied to an election that is why we are not growing in Africa when we are looking at an election, then everyone is just thinking of five years then we will never have long-term planning. The government must plan and put elections aside and do the right things; even elections will come right for you. An economy must begin to recover then elections will become easy for government. If we are going to do the wrong things thinking that you are pleasing people, it will not work. We need a better economy from everybody; it does not matter who makes the economy better,” Hamududu said.
And he cautioned that dependence on austerity measures alone to fix the economy was not a solution.
“Austerity measures are good, but if austerity measures are the only measures then, (they will) backfire! Austerity measures simply means that government stops spending; look, if, for example, government bans workshops and you have a weak private sector, it means that there will be no workshops in lodges, then the lodge owner will be crippled up and will close down. The austerity measures, alone, they become counter-productive to the economy. Austerity measures only work if they are put together with other measures that promote growth,” said Hamududu.
Zambia’s external debt leaped to US $11.20 billion as at December 31, 2019, for the first time in the country’s history, mainly on account of new disbursements on existing loans, mostly earmarked for infrastructure development.
On the other hand, the country’s fiscal position at 8.2 per cent of Gross Domestic Product (GDP) is worse than the government’s targeted 6.5 per cent.