The talk of the IMF has started again. Last year, while serving as National Secretary for the Economics Association of Zambia we held a series of discussions around the IMF. From time to time I appeared on Diamond TV and talked about the same.
With the talk back, I thought I share my thoughts again:
The IMF is not a development bank – it does not finance projects nor does it give loans for ‘development’. The IMF was created to protect the International Financial System – the system of international payments between and among countries.
The IMF’s primary role is to help a country in severe financial trouble which might be unable to pay its international bills thereby causing potential problems for the stability of the international financial system.
Severe financial trouble means:
1. Higher levels of foreign debt requiring more $ to pay than the country can generate.
2. Higher & growing fiscal deficits
3. Reduced foreign reserves held by the Central Bank
Does Zambia meet the criteria of a country in severe financial trouble?
YES: Rising fiscal deficits & rising foreign debts.
Is the IMF the only solution?
NO: Eurobonds are readily available – but cost more.
So why the fuss about the IMF?
Cheaper loans, 0% interest.
Why scared of the IMF?
Because their loans come with conditions:
A country on an IMF loan will have to implement economic reform measures to avoid the conditions that led it to the IMF the first time.
Think of it like seeing a doctor after an STI – Matenda osamvela: While on medication the doctor will advise you to have protected sex – use a condom – so that you do not contract another STI: The condom is the conditionality. Even after the medication the doctor would still advise one to use a condom but as you know, vija vintu nivovuta so you find people going back to the doctors again. Same with the IMF, Zambia graduated from the IMF programme with reduced debt. But overtime, the appetite to borrow increased significantly, and now we are back to them.
Sadly, the IMF are not keen now, because we are seemingly fiscally indisciplined. Its like going to the doctor with an STI every 6 months, the doctor might say: Uli nachibanda iwe, go and try prayers or see traditional healers since you don’t want to heed to professional medical advice. Usually in this case the guy with the STI will get all defensive and say such things as:
“You think you are the only one that can cure STIs? How do you think our forefathers survived without doctors like you? Its fine, we will get back to our roots and take care of ourselves. You and your medicines can go where you came from. Infact, I think the medicine you give us is what is causing these STIs, how come we don’t get healed fully? You make us dependent on you so that we should be paying you.”
When the local herbs fail we look to Chinese herbs – Loans. When they fail we look to TB Joshua for prayers.
But we know how the story ends, don’t we? Relatives end up taking the STI patient to the doctors on a stretcher when it is too late, pa last drastic measures like tijube nanikani – Privatisation – comes in, otherwise azafa muntu.
Sit down, be humble.
Good day folks!