ECONOMIST Dr Grieve Chelwa says getting on an IMF programme has potential to inflict pain on ordinary Zambians and there are other options to consider as the new government works towards reviving the economy.
Speaking when he featured on Hot FM’s Hot Breakfast Show, Wednesday, Dr Chelwa, however, noted that the current government was highly likely to clinch a deal with the Brenton Woods institution because it was more organised than the previous administration.
“It’s kind of like going on a diet. You want to lose weight, you go on a diet. The diet can be stringent so that you get your objective of losing weight and it can be painful on the body. So that is exactly how an IMF programme works. It is a reasonable argument (that IMF will hurt ordinary Zambians), going back to my analogy of a diet, a diet is painful on the body. Similarly, an IMF programme tends to be painful because the reason you got into trouble in the first place is that you were profligate in the way you were spending. So basically you have to get your accounts into order, which means doing what is technically known as fiscal consolidation,” he said.
“By getting your fiscal accounts into order, you might have to cut some spending and often the easiest kind of spending to cut is social spending: health care, education those kinds of things, and those type of expenditures do benefit the the poor. It is from that sort of basis that most people very skeptical of IMF assistance or IMF programme. There is history to this, is that decades of history that has shown that countries that have gone on an IMF programme have had to endure crushing austerity, there is a lot of evidence supporting that, even Zambia’s own experience with the IMF leads to that particular aspect.”
And Dr Chelwa supported PeP leader Sean Tembo’s alternative to the strict IMF conditions.
“I think Mr Tembo put forward one option which is quite fascinating. Mr Tembo’s solution is that we’ve got a Eurobond due next year, international markets are now seeing Zambia in a very favourable light precisely because they trust Mr Hakainde’s Presidency. So why not issue a fresh bond right now because it will cost us much less since the international capital markets are viewing us favourable, get the proceeds from that fresh bond to pay off the bond that’s due next year and then that year we avoid these conditionalities, it is strict, painful conditions that come with the IMF. So I think Mr Sean Tembo’s proposal is rather intriguing,” he said.
He insisted that Zambia did not entirely need the IMF.
“In days gone by, it was very difficult for poor countries to communicate with the outside world. So the IMF was seen as the only arbiter of whether you are on the right track or not. But in today’s world, we have media, we can communicate, the President and Minister of Finance for example can put together a very strong public relations effort to communicate that the country is really on the mend and this is what we are going to do transparently to get it on the mend and then we can have positive investor confidence,” he said.
“So it is not entirely the case that today the only arbiter of investor confidence is the IMF, we can do it ourselves by effectively communicating, transparently communicating and I think Mr Hichilema the way he has been communicating so far has been sort of showcasing that kind of confidence. So I would say we don’t entirely need the IMF, we can pursue other avenues of broadcasting our credibility.”
Meanwhile, Dr Chelwa said the meeting between IMF country representative and Finance Minister Dr Situmbeko Musokotwane on Tuesday showed that clinching an IMF programme was top priority for the new government.
“There are two things there to note: the first one is that it is actually striking for me that the first public meeting that the Minister of Finance has had is the IMF. But I would rather have him meet with Zambian constituencies, meet the workers’ movements, meet civil society, meet manufacturing sector, meet the unemployed youths, but it is quite interesting that he decided to meet the IMF. This really shows that this government is very serious about engaging the IMF, it is a top priority for them. The fact that the resident representative is in the country now and met with Dr Musokotwane yesterday (Tuesday) makes it clear that relations between the IMF and Zambia might be improving as you know it has been rather fraught over the last five years,” said Chelwa.
“I think it (clinching an IMF deal) will happen sooner rather than later. It seems to me, we’ve got a new government that certainly, I think it’s not controversial to say, that’s certainly much more organised than the previous government, and the IMF tends to like those kinds of things. And Dr Musokotwane has had long long experience of negotiating with what we call the Brenton Woods institutions so certainly, I can see an IMF programme coming soon rather than later. ”