IMF ‘branding’ to impact negatively on Zambia
THE 2018 African economic outlook report has indicated that the 2017 reclassification of Zambia as being at high risk of debt distress by the International Monetary Funds (IMF) will pose challenges for the government in the coming years.
The outlook is an annual report prepared by the African Development Bank for its member-states.
According to the report released yesterday, the reclassification was expected to add upward pressure on lending rates, although the more positive growth outlook was likely to push interest rates downward.
“Agreeing to a fiscal stabilisation programme with the IMF in 2018 would help offset some of the effect. The government needs to prioritise lending in the coming years as it tries to regain market confidence, leading up to the rolling over of the 2022 Eurobond,
“Contractor-financed projects, with no clear tendering process increased the cost of projects, leading Zambians to question whether their taxes are achieving value for money,” said the report.
The report, however, indicated that fiscal consolidation would be the key driving force for spending in 2018 as the government strived to meet its targets.
It also said the high domestic borrowing was expected to dampen growth of credit to the private sector.
Meanwhile, the report indicated that demand for copper in China was projected to continue to 2018; combined with the forecasted copper supply deficit and that prices were expected to remain at their current levels or rise slightly into 2018.
“From 2016, the stability of the mining tax regime increased, which is expected to support copper investment and production in 2018. Ongoing energy reforms, driven by higher electricity tariffs, will continue into 2018; revisions to the Electricity Act and the Energy Regulation Act will increase guidance on grid access and encourage privatesector involvement.
“Reduced subsidies to the electricity and oil subsectors will help offset some fiscal pressures caused by higher interest payments and continued infrastructure investment drive. In 2016, international portfolio investors returned to Zambian securities, maintaining international reserves at US$2.3 billion and raising domestic borrowing to more than 4 percent of GDP in 2017,” said the report.