Former Finance minister Felix Mutati says government’s failure to pay the African Development Bank (AfDB) an outstanding loan of US$1.4 million has caused panic and eroded confidence in the economy.
And Mutati says an IMF programme is indispensable if Zambia is to regain investor confidence and resuscitate the exchange rate.
Meanwhile, Mutati has charged that some parastatals under the Industrial Development Corporation (IDC) were straining the Treasury and would be better off sold to create liquidity.
Speaking to journalists after attending Christmas Mass at Chelstone Catholic church, Wednesday, Mutati said US$1.4 million was such a small amount for government and attributed the missing payment to bureaucracy.
“I am not convinced that there is no money. I think its bureaucracy that does not respond in a timely manner. I think we need to check our systems to ensure that we don’t create a sense of panic that we are not able to pay US$1.4 million or whatever that amount is. This will erode the confidence. It will erode a lot of confidence in the economy and it will create panic,” he said.
He said government had no option by to engage the IMF for help.
“So for me, what needs to be done to push the economy on a path where we achieve stability as a basis of growing the economy; it is quite obvious that we need to have better conversations with the IMF. Through the IMF, we will be able to secure support in terms of foreign exchange, through the IMF, we will be able to plough back public confidence. Through the IMF, we will be able to get that certificate of economic recouth that will give confidence to the investors that Zambia is ready to engage. So the IMF route is indispensable.”
He noted that the kwacha had continued to depreciate and listed ideas that government could pursue to keep the economy on track.
“This year alone, it is estimated that the kwacha will go down by 21 per cent. Now the exchange rate has a telling effect on the cost of living for people because it immediately translates into increased prices of commodities. It immediately translates into making it difficult for an ordinary person to be able to make ends meet. Today you can go to the market and find the price of commodities has changed, and when you ask them why, they will tell you that it’s because of the dollar rate. So what needs to be done? There are few things that need to be done. One of the things that need to stop is, for example, missing payments as it has happened with Africa Development Bank,” Mutati said.
“Number two, we also need to move with a sense of urgency in terms of re-profiling the debt portfolio, particularly the one associated with China and then move to the Eurobonds, as a way of trying to dampen the pressure of debt servicing on the meager resources that the country has. Three, we need to move with a sense of urgency in terms of putting in place the reforms that have been announced in the power sector. The answer to the power sector challenges, beyond climate change issues, is how can you attract private investment when some of the bureaucracies, the regulations and procedures are not yet effected from the private sector? We can bring in someone for solar, but they need to have transparent regulations and procedures in order for them to invest their money.”
He further called for the re-examining of portfolios of parastatals under the IDC to ensure that they don’t overburden the Treasury.
“And the fourth issue that we we need to focus on ahead of 2020 is implementation of austerity measures that have been announced. There has to be outward signals that implementation is actually taking place. That way, we are going to see the GDP, which is estimated at two per cent growth this year, begin to take an upward turn. Beyond that is accelerated efforts of revenue production. What we need is more and more money in order to provide relief particularly to our domestic supplies. Our domestic suppliers are hurting because they are owed a lot of money,” Mutati said.
“The last point is that let us reduce the burden on the Treasury. The parastatals that are under IDC should have IDC as a point of rescue and not government. So if Zesco is having challenges to pay for power, their point of rescue should be IDC so that the Treasury is left to deal with the social problems that the country is facing. And we must also re-examine the portfolio under IDC to see whether the choice is to continue receiving those meagre dividends or we can turn some of those assets into liquidity.”
Meanwhile, in a separate interview, Tuesday, Mutati said he had no issues with MMD president Nevers Mumba because he understands that people must compete for ideas, issues and perspectives on how to contribute to the nation.
He said he was still consulting on the future of his political career.
“For me, I have never had a personal difference with Dr Mumba. There has never been, between me and him, bad blood of any definition. So, from my perspective, we can have differences about issues and ideas and debate those differences. But let it not be that it degenerates into a personal issue. All along, I have never, as a person, called Dr Mumba any names that, ‘you are this, you are that’ because for me, I see that as irrelevant politics and those politics will never be able to build the nation,” Mutati said.
And when asked where Zambia should expect to see him, politically, starting in 2020, Mutati said he was still consulting on that.
“I am still in the mode of consultation and I am hoping that by the end of this year, I should have closed off those consultations then give you the answer. In my consultations, I don’t want to pre-empt some of the places that I haven’t yet engaged because once you have pronounced yourself then you pick up your phone and say, ‘I am coming to consult’ then the chap will say, ‘what are you coming to consult about? You have already said what you want, you just want to use me as a rubber stamp. So, I will let you know of my once I conclude my consultations,” replied Mutati.