THE International Monetary Fund’s (IMF) announcement that it is discussing an economic programme with Zambia offers the country a glimmer of hope that will come with numerous benefits, says economist Chibamba Kanyama.
And Kanyama says the engagement of French firm, Lazard Frères, to manage the country’s debt may be the pivotal development that has encouraged the IMF to begin its talks in reigniting a much-needed economic programme for Zambia.
In an interview, Kanyama said that the Fund’s announcement that it was currently discussing an economic programme with the Zambian government may even lead to the kwacha’s appreciation following an improvement in the country’s perception to address the huge debt stock.
“It’s really like your parents saying, look, they have been resisting you to marry this man, but finally they say, ‘okay, we can enter discussions, not that we have approved, but we can sit at the table.’ So, I think to us it’s glimmer of hope and what you may notice immediately is that the exchange rate will begin to slightly appreciate in favour of the kwacha because the international market and investors are monitoring this situation very rapidly because it’s not the financing that we shall receive from the IMF that really matters. But the bottom line is the opportunity that this will create for this country to get access to financing and even possibly restructuring our debt. But it’s a rapid financing so it’s maybe a bullet payment to support our balance of payment with relaxed conditionality’s. The announcement on its own has elevated some profile of Zambia in terms of rating that, ‘we are going to discuss.’ Just the announcement induces some level of certainty and stability. You must know that this is a rapid financing instrument of the IMF and it is given under an emergency,” Kanyama said.
And Kanyama said government’s decision to engage Lazard Frères may have encouraged the IMF board to open up discussion lines for Zambia.
“First of all, the IMF is not involved in private debt that Zambia is involved in and, therefore, the IMF cannot push for Lazard Frères’ involvement with Zambia. However, it signals something and it’s a development that the IMF is supporting, they may not declare it openly, they can never do that. But behind the doors, having worked there, I know they are applauding the decision because they have been struggling to bring levels of debt to sustainable levels. So, Zambia initiating, engaging somebody is very possible that the IMF is excited, and it is very possible that somebody in the IMF may have whispered, off the line, unofficially to our authorities that, ‘you guys, don’t hold us responsible for this but take this line…’ That’s very possible, as long you don’t say, ‘you advised us’ because they don’t want to be responsible for this kind of decision. However, it is signalling something to the IMF that at least by engaging a debt manager, the sustainability levels of debt may be contained by a party, who is not us and that could have enhanced IMFs board to say, ‘looking at what is happening, can we open the lines for this country’,” said Kanyama.
Last week, the Fund had announced that the current staff team now had the mandate to discuss an economic programme with Zambia as its virtual consultative and information exchange mission got underway and ends this Wednesday.
The IMF mission team will not only conduct virtual consultative and information exchange sessions with the central government, but also engage the Bank of Zambia (BoZ), Zambia Revenue Authority (ZRA), and other stakeholders in the economy.