IMF TIPS GOVT
Fund directors noted that under current policies public debt was on an unsustainable path, and ongoing financing constraints had started to force the inevitable fiscal adjustment to occur in a disorderly way, with mounting expenditure.
THE International Monetary Fund (IMF) has advised Government to urgently implement large front-loaded and sustainable fiscal adjustment as this will create space for proper planning.
The IMF in its latest report on Zambia cautioned that there was a narrow window for tackling fiscal challenges in an orderly and planned manner for the country.
IMF directors noted that under current policies public debt was on an unsustainable path, and ongoing financing constraints had started to force the inevitable fiscal adjustment to occur in a disorderly way, with mounting expenditure arrears.
This, they said, would require a large frontloaded and sustained fiscal adjustment centered on stronger control and prioritisation of public investment projects.
“This would also require and postponing the contracting of new non-concessional debt, accompanied by enhanced revenue mobilization and the scaling back of exemptions and tax expenditures, while reducing domestic expenditure arrears,” the directors said in their report.
The directors also emphasised the urgency of reforms and of a firm commitment to implement them.
This was after they expressed concern that public debt and debt service had increased rapidly due to heavy reliance on non-concessional debt to finance large infrastructure investment, while growth had lagged.
This therefore according to the director’s had put Zambia at high risk of external and public debt distress.
Meanwhile, the directors welcomed the Cabinet decision in late May to indefinitely postpone contracting of all new non-concessional loans.
They also welcomed the decision to cancel some committed but disbursed loans and enhance the control and management of disbursements of foreign-financed loans, and to strictly adhere to public financial management rules under the 2018 PFM Act. They emphasised that strong actions would be needed to reduce debt-related vulnerabilities and called for continued efforts to enhance debt management and transparency.
They urged the authorities to address weaknesses in procurement and in project selection and management to ensure prioritization and greater investment efficiency.
The IMF in its latest report on Zambia cautioned that there was a narrow window for tackling fiscal challenges in an orderly and planned manner for the country.