Can the IMF trust the PF government? The simple answer is no, and here is why. From the time of the key spendthrift, under the PF government’s first Finance Minister, Alexander Chikwanda who started the mess we are in with false promises of reform, belt tightening, lowering the debt exposure, reducing expenditure, to Felix Mutati, and then ‘sober’ Margaret Mwanakatwe to Bwalya Ng’andu, there has been talk, talk and more talk but with a continuation of frivolous spending.
Indeed, as Prof Oliver Saasa stated, Dr Ng’andu is a Finance Minister without finance. There is more bad and ugly than good in his 2020 budget. The only one exception being the cancellation of the hair brained idea of Sales Tax, which the ZRA boss is still defending.
The bad and ugly: why in the world would Dr Bwalya Ng’andu allocate about US$494 million, which is about 6.2 per cent share of the budget, to defense spending, in a basket full of the current economic crisis exacerbated by debt, load shedding, arrears and endemic corruption? This can only make sense to an inverted government like the Patriotic Front, which thinks in reverse. It is for the same reason that they did not blink an eye when spending over US$135 million on a luxury presidential jet. They do not understand what being frugal means. After all, it’s not their money.
To be sure, the 2020 budget is nothing but an upshot of misplaced priorities and gross economic mis-management which successive PF Finance ministers tried their best to hide behind a smokescreen of figures far from facts.
But the reality check for government begins soon. The World Bank/IMF Annual meetings start on October 18 in Washington DC, which the Finance Minister is expected to attend. The Article 4 report that the IMF issued in August gives us an idea what the IMF is going to be asking and looking for. IMF had originally assumed that adjustment would start in 2019, which includes scaling back on borrowing. The adjustments would, if government and IMF have successful negotiations, at the earliest begin in 2020, which is the earliest an IMF programme could be put in place. But even then, we do not see this happening.
One big difference between the budget just presented and the IMF adjustment programme outline is that the external project borrowing in 2020 would need to be K12.7 billion (about US$ 948 million) lower. Further, Dr Ng’andu has not explained where the “exceptional revenue” of K6,750,000,000 (about $515 million) is going to come from.
The New Minister of Finance knows there is no money expected in the Treasury. He knows government desperately needs donor money. It is visible in his 2020 national planning that the minister had very limited or zero expectation of donor support for the budget. What is factored in the budget is Chinese money coming through construction. It appears clearly that the K10 billion earmarked for construction in the budget is expected to come in as infrastructure credit from the Chinese.
In the sense of balance of payment support, there is nothing in the budget. That has not been clearly factored in because the minister knows that to unlock that money, he needs the IMF programme. This is the reason why government has now escalated its demand to the IMF for a country representative after the pervious regime at the ministry pushed for the recall of Alfredo Baldini.
Now, it is no longer a secret that the IMF is still apprehensive about giving Zambia a bailout package given the country’s failure to reform on austerity measures. What the IMF may consider doing is putting Zambia on a similar programme as Zimbabwe, where instead of giving a fully funded bailout programme for support of balance of payment to government, they would give a staff monitored programme.
This entails that instead of Zambia receiving the much sought after US$1.3 billion, the IMF would send its staff to observe and advise government on expenditure reform, but without giving the money until the country meets set out benchmarks.
It’s like someone who has been battling with an alcohol addiction being desperate for money, and comes to you as an uncle to say, “please help me”. The uncle says “I want you to first live in my house so that I monitor your behavior, but I will not give you one ngwee until I am convinced that when I give you money, you will not go back gambling with it and abusing alcohol again”. You can plead that “uncle I need that money now”, but a responsible uncle will put his foot down until he sees the positive effects of the rehabilitation programme for your alcohol addiction. We see the IMF demanding this from our alcohol addicts in the PF government.
It should also not surprise us if the IMF is not eager to send a country representative to Zambia, partly because of the circumstances surrounding the departure of Baldini and partly because of the political sentiments against the IMF from State House. Dr Ng’andu has a tough time turning this image around and he knows that he will get nothing from the IMF without a country representative.