by Natasha Sakala on 24 Jun 2019by Natasha Sakala on 24 Jun 2019by Diggers Correspondent on 24 Jun 2019by Tenson Mkhala in Kasama on 24 Jun 2019
- Goal Diggers
by Abraham Kalito on 19 Jun 2019by Abraham Kalito on 17 Jun 2019by Abraham Kalito on 17 Jun 2019by Abraham Kalito on 10 Jun 2019
by Diggers Correspondent on 24 Jun 2019by Sipilisiwe Ncube on 24 Jun 2019by Martha Mwanza on 24 Jun 2019by Martha Mwanza on 24 Jun 2019
by Zondiwe Mbewe on 24 Jun 2019by Zondiwe Mbewe on 24 Jun 2019by Zondiwe Mbewe on 22 Jun 2019by Zondiwe Mbewe on 21 Jun 2019
- Editor's Choice
by Diggers Correspondent on 24 May 2019by Diggers Reporter on 4 Mar 2019by Andyford Mayele Banda on 29 Jan 2019by Davies Mwila on 22 Jan 2019
by Diggers Editor on 23 Jun 2019by Diggers Editor on 21 Jun 2019by Diggers Editor on 20 Jun 2019by Diggers Editor on 19 Jun 2019
by Martha Mwanza and Felix Kashweka on 21 Jun 2019by Zondiwe Mbewe on 7 Jun 2019by Mukosha Funga on 30 May 2019by Sipilisiwe Ncube on 23 May 2019
- Guest Diggers
by Dr Chisoni Mumba, PhD on 22 Jun 2019by Chewe Chishala on 22 Jun 2019by Chibamba Kanyama on 11 Jun 2019by Chibamba Kanyama on 28 May 2019
Zambia is not ready for IMFBy Diggers Editor on 12 Jul 2017
The IMF has assured us that despite President Edgar Lungu’s declared Threatened State of Emergency, the Fund is still committed to reaching an agreement with the Zambian government for the loan deal. But to us, something doesn’t just tie up on this IMF ‘standoff’ which is, quite frankly, becoming a nuisance. We have taken time to inquire from local and international financial experts, economists and political scientists about what they make of the IMF hullabaloo.
From our findings, there is every indication that the much talked about US $1.6 billion funding by the International Monetary Fund may not even succeed. The Government, through the Minister of National Development and Planning Lucky Mulusa, has boasted that Zambia is not desperate for any aid package from the IMF. President Edgar Lungu recently told a media conference that if the IMF had problems with the declared Threatened State of Emergency, ‘they can go’.
First, to say ‘they can go’ implies the IMF is already on course with the programme. Far from it. The IMF is not even here because the ball of facilitating for a successful implementation of the programme is in the court of government. We have learnt that during the most recent visit by the Fund, a lot of time was spent reconciling local and international debt. The multilateral Bretton Wood lender is extremely meticulous about lending money to unstable economies. The recent experiences in Mozambique where it had to exhume undeclared debt guarantees by that government has taught the IMF a huge lesson about the need to tighten all loose nuts prior to lending.
The primary process in implementing a programme by the Fund is ensuring the Debt Sustainability Assessment is thorough. All existing debts whether due for repayment at that moment or in future must be reconciled and declared. Once this has been ascertained, the IMF will decide whether or not a country qualifies for any debt. The figure of US $1.6 billion has been floated for over a year now even before government made a request. This number has never been on the lips of IMF Mission Chief Tsidi Tsikata, a Ghanaian national whose retirement from employment is said to be delayed by the Zambia programme. US $1.6 billion could be the imagination of the Zambian authorities. That could be the amount Zambia is desperately in need of to square off the deficit in its balance of payments position.
Going by most recent experience in Sub Sahara Africa, the IMF programme may be in the range of US $600 million. The actual position would be determined by the Debt Sustainability Assessment. We have learnt that, as at now Zambia’s debt figures are not reconciling. The domestic debt figures are not speaking to each other- what the auditors have and those existing on the books of various ministries are not the same.
International debt equally requires reconciling. It is believed that the figures the government officials computed are those for debts due for repayment. The rest remains guess work. The Chinese debts have continued coming even when a programme is running. This is like trying to assess the actual ailment of a patient to determine the dosage but the patient keeps acquiring new ailments before the assessment is completed. This could be hard for Tsikata and IMF team. Would this be the structural benchmark the IMF has pronounced as ‘action steps for a programme to take effect’? Is the Zambian Government ready to undergo this rigorous examination at this stage?
Government believes it is no longer a patient and the examination is unnecessary. The flu that was widespread, devastating its economic potential, no longer exists. Mulusa’s bragging that Zambia is not desperate for IMF help is strange and suspicious. It seems the government has been flattered with the monetary policy engineering by the Bank of Zambia that has succeeded to keep the temperature low (of course without treating the disease). We understand that the government had to borrow specifically to cover salaries for last month. But assuming that was not the case, assuming Zambia was on the right track; the exchange rate favouring the Kwacha, economic growth revised upwards, copper prices rebounding, load-shedding over and President Lungu is launching Chinese funded projects day in day out; how can President Lungu, Mulusa and those who are boasting forget that those uncompleted projects are accumulating astronomical interest rates in favour of the contractors who are currently smiling and sipping coffee in their offices?
In short, Zambia is no longer as desperate for the IMF programme as it was last year because it is not ready for the conditionalities and the debt sustainability analysis is not reconciling. Only Finance Minister Felix Mutati knows that the fiscal position of Zambia is still in dire straits.
The sinking fund for the sovereign bond which matures in the next few years is reported to be empty. The Chinese funding for projects does not come in cash terms, to support the cross-border transactions in form of balance of payments. Zambia’s position on import cover is dangerously low, and we understand that gold reserves have been depleted. The warm-cloth massaging by the Bank of Zambia to keep the monetary temperature low has only managed to devastate cash positions of commercial banks. Right now, many banks have no cash, only sustained by overnight lending which is further weakening their balance sheets. Some banks are no longer lending money but spending time asking their clients to deposit cash. Others have gone the extent of intermittently switching off their electronic system to reduce the amount of money withdrawn from the automatic machines. It is a common occurrence to encounter messages of ‘sorry, the system is down’ displayed on ATMs. There is certainly a problem in the country, many companies are facing liquidations. Does Zambia truly not need IMF funding to put the macroeconomic benchmarks in order?
The Chinese formula of project financing is only good for China which is now able to lend long term for projects managed by Chinese companies, using Chinese labour and utilising Chinese manufactured inputs. The fact that the Chinese are smiling now should not be reason to think Zambia’s economic problems are over. The IMF loan is needed for more reasons than balance of payments support. The Fund will have a firm grip on financial discipline. It will also facilitate funding from other donors.
What the government might be ignoring is that donor support to Zambia is on hold awaiting the successful conclusion of the IMF programme. Donors want to lend money to countries that have structural capacity to manage funds. The voice of donors is currently muted in areas of governance because their exposure to Zambia is currently low. They have rarely said anything on the legally challengeable incarceration of Hakainde Hichilema, the leader of the United Party for National Development, because they cannot tie their voice to funding. Only the European Union did speak because of its anticipated multimillion dollar renewable energy support to Zambia.
The donors may have a voice on Zambia’s governance record once the programme request goes to the Executive Board of the IMF. The IMF does not speak on governance. They lend as long as there is a government in place. IMF is in business of making money. However, the Board can have some economic reason to reject it without necessarily referring to governance. The Executive Board members represent their respective countries and there can never be any better opportunity to re-engage Zambia on faltering democratic benchmarks than at the time of approving the programme. The Board can stop the program if they see need to do so. This possibility may explain why the Zambian government may pre-empt the decision by asking the IMF to ‘get out’ even before it comes in. By the way, once the IMF comes in, it will be impossible to ask it to get out without dire consequences!
About Diggers Editor
The Editor of News Diggers gets to decide what is published. Contact the Editor or send your letters at: editor [at] diggers [dot] news.
- The NAPSA, AVIC deal stinks of corruption! - 23 Jun 2019
- GBM acquitted! His strategy is working, he’ll get rich again - 21 Jun 2019
- ESAAMLG report has exposed DEC, ACC - 20 Jun 2019
- A legacy is earned not declared in speeches, The case of FTJ Chiluba - 19 Jun 2019
- Stealing in the name of God - 18 Jun 2019
- Govt reluctant to address hunger crisis in opposition strongholds, notes Tembo
- Chibamba explains kwacha appreciation
- I’ve no alcohol problem, says Chipampe as he outlines his State House agenda
- CBU union laughs at UNZA’s “joke” honorary degree on Lungu
- NAPSA defends 25.8m AVIC tender, but refuses to explain inflated cost
Subscribe for email alerts
ArchivesJul0 PostsAug0 PostsSep0 PostsOct0 PostsNov0 PostsDec0 Posts
- June 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
The News Diggers
Deputy News Editor
Plot No. Lus/9812/649-MC8
off Alex Chola Road
P.O. Box 32147
Telephone or WhatsApp:
diggers [at] diggers [dot] news
editor [at] diggers [dot] news
Send this to a friend