UNZA economics lecturer Professor Manenga Ndulo has asked those who argue that Zambia doesn’t need the IMF at this juncture where they think money for debt repayment will come from.
In an interview, Prof Ndulo said much as the IMF was not the best option for Zambia, it was inevitable to run to them at this point, given the heavy debt the country had acquired.
He observed that some critics where arguing that government had no plan, but wondered how government could plan effectively when 97 percent of its revenue was going to debt repayment.
“The best situation is not to be with the IMF but when you have a crisis, you go to the IMF. So Zambia, if it ran its economy prudently, they don’t need the IMF, they can run it but they go to the IMF because they mismanaged the economy. They got into heavy debt and they have payments due where they don’t know where the money will come from. So those who are saying we don’t need the IMF, where will they get the money from because these things [the debt] are due I don’t know this year June or whatever. You don’t have a choice, you just have to get that loan,” he said.
“And then the IMF loan, it won’t solve the problem but it will give you space because part of the condition is those; agreeing to restructuring, so that you have space to do these other things. You are saying the government has no plan, how can they have a plan when 97 percent of their revenue is going to debt? So it is inevitable you have to sort out the debt thing, you can’t do anything.”
Prof Ndulo insisted that Zambia needed support to resolve the debt crisis.
“You can’t even think of going forward unless you sort out the debt. That is why the IMF is inevitable and you don’t permanently go to the IMF, you go to the IMF when you have a problem. And Zambia right now has a debt problem and the only way they can resolve it is support. And they are members voluntarily, no one forced them to join. Some countries are not members of the IMF. When you were borrowing from Eurobond, you didn’t go to the IMF to say we are going to borrow from Eurobond. You did it on your own. The IMF had no business, but because you over borrowed, you got stuck then where do you go? You know, in the end even if you don’t like a doctor or whatever, in the end when things get bad, you say let me just go and see the doctor,” he said.
He said Zambia had actually clinched about 12 IMF programmes in the past, but immediately those ended, government got excited and started borrowing Eurobonds.
“Zambia joined the IMF I think in 1965. We did not need IMF borrowing until 1970 when there was a problem. There was a big mine disaster and there was no foreign exchange earning, that is when they went to IMF. People think that they had not been to IMF; Zambia has had more than 12 IMF programmes. Under Kaunda, there were so many and all that, I think the last programme was around 2009 or 2010, that’s the last IMF programme we had and they left. Then Zambians got excited, they started going to the Eurobond borrowing money then they were in problems then they go back to the IMF,” Prof Ndulo said.
“So the IMF didn’t come, Zambia went there because they are in trouble. And so people saying you don’t need to go to the IMF, you can use home-grown solutions, there is nothing like that. You see, the IMF is about balance of payment support. In other ways, just as we were talking about export earnings, when that money is due (Eurobond) the owners of that money, the creditors, they want dollars. Now where are you going to get the dollars to pay them? That’s why you go to the IMF because the IMF they have got dollars; you get a loan, balance of payment support to pay the guys.”
Asked on whether the country needed to make some adjustments due to the impact of the Russia, Ukraine war, Prof Ndulo said adjustments were inevitable, and highlighted the need for savings.
“The adjustment is where the impact flows. I think the major impact is likely to be on fuel and also on food items because Ukraine is a major grain exporter. But the adjustment, it depends on what’s happening because if you have something coming from outside and something has happened, even in a home, you have to adjust. You can’t say ‘no, let’s ignore’, unless you are a prudent family, you have savings. That is why people, you should always save. So if there is this thing you look back, this thing is bad but meanwhile, we have saved so we can move this and then you adjust,” Prof Ndulo said.
“But where did Zambia save? That is where they are comparing other countries like Rwanda. Rwanda has savings, Botswana has savings, Botswana even lends money to IMF.”
He urged government to focus on running the economy prudently.
“The major focus is that for growth, we have to manage the economy prudently so that when there is a problem in future, you, as head of the household [government] who takes care of the family knows when there is a problem, ‘guys, don’t worry we have something’. But I think we are not thinking about that. So that is why you run the economy prudently so that you can save. You know when they did the debt, they were talking about the sinking fund, that was the purpose but they didn’t follow it up. What countries usually do when you get a big loan at the same time, you create a sinking fund so that every year, you put money so that when the loan is due, you go to the fund and pay,” said Prof Ndulo.
“But that was not what was done. Right now, what’s the space? Even if you wanted to support something, as you are saying, if something bad comes and the government wants to support, where will they get the money? People say the mines but the mines are companies, they only pay tax once a year.”