Zam­bia Sus­pends Non Con­ces­sional Bor­row­ing as it aims to Con­clude IMF Deal

Zambian Business Times - - FRONT PAGE -

Fi­nance Min­is­ter Felix Mu­tati has an­nounced mea­sures that are ex­pected to step gov­ern­ment bor­row­ing and mov­ing the coun­try from a " high debt dis­tress" po­si­tion to mod­er­ate over the medium term and to en­sure that debt re­mains sus­tain­able.

Zam­bia Fi­nance Min­is­ter Felix Mu­tati (right) with IMF Di­rec­tor for Africa Re­gion Dr. Abebe Se­lassie (cen­tre) and IMF head of mis­sion to Zam­bia Dr. Boileau Loko

Fi­nance Min­is­ter Felix Mu­tati has an­nounced mea­sures that are ex­pected to step gov­ern­ment bor­row­ing and mov­ing the coun­try from a " high debt dis­tress" po­si­tion to mod­er­ate over the medium term and to en­sure that debt re­mains sus­tain­able. He said this on 22 Novem­ber in his min­is­te­rial state­ment de­liv­ered to Zam­bian law­mak­ers at Par­lia­ment.

Mu­tati who was giv­ing the gov­ern­ment po­si­tion and brief­ing to Zam­bian Law­mak­ers on the state and out­look of dis­cus­sions with the In­ter­na­tional Mon­e­tary Fund (IMF), said that in March, 2017, Cab­i­net ap­proved that the Gov­ern­ment should en­gage the IMF on a pos­si­ble line of credit un­der the Ex­tended Credit Fa­cil­ity - ECF. The en­gage­ment was on the ba­sis of the Eco­nomic Sta­bil­i­sa­tion and Growth Pro­gramme - ESGP.

He said that the en­gage­ment with the IMF was aimed at lever­ag­ing in­ter­na­tional sup­port for at­tain­ing the Gov­ern­ment’s key ob­jec­tives of restor­ing fis­cal fit­ness, debt sus­tain­abil­ity, ad­dress­ing the ex­ter­nal sec­tor vul­ner­a­bil­i­ties, job cre­ation, sus­tained in­clu­sive growth and de­vel­op­ment. Mu­tati clar­i­fied that this en­gage­ment does not mean that the IMF is here to bailout Zam­bia, we have as a na­tion, de­fined the ESGP that is re­quired to move the econ­omy for­ward. The IMF is be­ing en­gaged to pro­vide the Bal­ance of Pay­ment (BOP) sup­port as well as to pro­vide an in­de­pen­dent pol­icy as­sess­ment.

The Fi­nance Min­is­ter later con­firmed that the main out­stand­ing is­sues un­der dis­cus­sion with the IMF are the need to take mea­sures to slow down on the pace of debt ac­cu­mu­la­tion and re­turn Zam­bia’s debt risk from high to low and scal­ing up fis­cal con­sol­i­da­tion mea­sures, par­tic­u­larly, ex­pen­di­ture re­straint. Both these as­pects are part of our key re­form mea­sures and are clearly out­lined in the Eco­nomic Sta­bil­i­sa­tion and Growth Strat­egy (ESGS). What the IMF has asked is to have these mea­sures ac­cel­er­ated.

Mu­tati said that the gov­ern­ment has put in place about 5 key mea­sures that should see the gov­ern­ment and IMF con­clude the ECF deal.

These mea­sures in­clude:

(a) devel­op­ing a new fi­nanc­ing pro­file that will en­sure the re­duc­tion in debt dis­tress from high to mod­er­ate over the medium term and to en­sure that debt re­mains sus­tain­able there­after;

(b) re-pri­ori­tis­ing projects by con­cen­trat­ing on on-go­ing projects;

(c) re-scop­ing projects to be im­ple­mented in stages to en­sure fis­cal sus­tain­abil­ity. An ex­am­ple is the im­ple­men­ta­tion of the Lusaka/Ndola Dual Car­riage­way which will be im­ple­mented in stages;

(d) ac­cel­er­at­ing the im­ple­men­ta­tion of rev­enue mo­bil­i­sa­tion mea­sures such as au­to­ma­tion, ap­point­ment to tax agents, es­tab­lish­ment of sin­gle win­dows at bor­der posts, land ti­tling and tolling; and

(e) sus­pen­sion of new non-con­ces­sion­ary bor­row­ing and that no com­mer­cial con­tracts that re­quire debt fi­nanc­ing should be signed without Trea­sury Author­ity with the re­quire­ment that ten­der and le­gal ap­provals be ob­tained where the funds are not avail­able.

Mu­tati fur­ther con­firmed that "in ad­di­tion to the pro­vi­sion of Bal­ance of Pay­ments Sup­port, the In­ter­na­tional Mon­e­tary Fund (IMF) is also a cat­a­lyst to ac­cess bud­get sup­port and other in­flows from mul­ti­lat­eral and bi­lat­eral co-op­er­at­ing part­ners. Fur­ther, hav­ing an IMF-sup­ported pro­gramme will en­hance in­flows from the pri­vate sec­tor in­vestors and re­duce the neg­a­tive sen­ti­ments on the in­vest­ment cli­mate in the coun­try. This is be­cause many in­vestors mainly rely on the IMF for the as­sess­ment of the coun­try’s in­vest­ment cli­mate".

The lo­cal unit, the Kwacha has slide in the past two months from highs of about ZMW8.9/USD to cur­rently about ZMW10.1/USD. Some an­a­lysts have ques­tioned the gov­ern­ment's Min­is­ter of Fi­nance and his team’s fail­ure to tightly man­age their fi­nances and en­sure strict pol­icy im­ple­men­ta­tion.

It is this lack of de­liv­ery of promised quar­terly fis­cal brief­ings and re­ports on both rev­enue mo­bi­liza­tion, ex­pen­di­ture and debt po­si­tions against bud­get by the Min­istry of Fi­nance that has led to the mar­ket opt­ing for an IMF/World Bank mon­i­tored pro­gram as as­sur­ance of strict im­ple­men­ta­tion of fis­cal con­sol­i­da­tion mea­sures and stem­ming of un-bud­geted ex­pen­di­ture. This per­haps is a clear in­dict­ment on the per­for­mance of the MOF team.

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