IMF ADVICE GOOD, TIMELY

THE advice by the International Monetary Fund (IMF) to Government to urgently implement radical and sustainable fiscal adjustments could not have come at a better time.

Already new Minister of Finance Bwalya Ng’andu has announced that the government will have to implement some drastic measures aimed at freeing fiscal space to increase the government’s capacity to meet its financial obligations.

In its latest report on Zambia the institution warned that there was a narrow window for tackling fiscal challenges in an orderly and planned manner for the country.

Shrinking fiscal space has pushed Government in such a tight corner that it has been struggling to manage expenditure and deal with spiralling domestic arrears.

This, IMF directors say, will require some painful adjustments aimed at delivering short-term results and give the government some space to attend to pressing fiscal matters.

The institution has noted that public debt and debt service has increased rapidly because of the government’s heavy reliance on non-concessional debt to finance large infrastructure development programmes while growth has been sluggish. We believe the IMF made an honest assessment and has issued the ‘advice’ in good faith aimed at helping the country wriggle out of the fiscal mire it seems to have found itself in in the last five years.

The economic turbulence Zambia has been experiencing as a result of soaring foreign and domestic debt has been cannon fodder to the opposition political parties and their allies in the civil society.

Instead of offering sober advice with practical ideas that Government could incorporate in the numerous policy measures it is working on to reverse the situation, leaders of these cabal have been issuing divisive and in many cases provocative statements.

This is despite the genuine efforts the government has demonstrated aimed at reining in runaway expenditure and stifling debt servicing obligations.

Even the IMF has acknowledged that something is being done about it. Dr Ngándu made it clear that there would be some radical changes aimed at increasing fiscal space and the capacity of the government to meet financial obligations, especially debt servicing.

Only last week he announced that he had come up with a programme in which he would be meeting various ministries to identify costly capital projects to adjust, suspend or halt to free resources. If this measure alone works well Government is expected to save about US$500 million each year. In May, as the IMF has rightly acknowledged, Cabinet made a decision to indefinitely suspend contracting of new concessional loans.

There is also a process to renegotiate some of the most critical loans. Some loans have either been cancelled or deferred. These are clear indicators that the government is committed to addressing the shrunk fiscal space and avoid defaulting on Eurobonds and other debts.

The situation in which Zambia is today is not as desperate as some as some doomsayers have been trying to portray to the outside world.

These challenges are not insurmountable because the country is already recording growth although not at the rate it would like to see. The fact that some growth is being recorded each year gives the nation hope that it is possible to bring the situation to normal. The debts government has contracted have helped transform many parts of the country, which have seen improved transport infrastructure without which no credible economic development can take place in any country. The ongoing construction and rehabilitation of roads, for example, have eased the movement of people and goods from one place to another.

Travel time has reduced significantly for both people and cargo saving a lot of resources.

It is therefore malicious for any individual or group of people to condemn the government for contracting the debt even when they have seen and are benefiting from the outcomes of the investments.

We urge the government to study the IMF report and its recommendations seriously and compare them with the policy changes it has already come up on its own.