The International Monetary Fund has advised the Zambian Government to avoid contracting new non-concessional debt.
And the IMF says the significant buildup in domestic expenditure arrears is weighing on households and businesses and presents a risk for the financial sector.
In a statement released after the end of the 2019 Article IV visit, the IMF said to reduce risks, the Zambian Government must put up a large up-front and sustained fiscal effort.
They said this should include avoiding contracting any new non-concessional debt, take steps to raise revenues, halt the buildup of new arrears, and align the pace of spending on well-targeted public investment projects with Zambia’s available fiscal space.
IMF said its staff and Zambian authorities took stock of recent economic developments and the future outlook and prospects as part of the 2019 Article IV consultation.
The IMF staff team was led by Ms. Mary Goodman and visited Zambia from April 16-30, 2019 to conduct the 2019 Article IV consultation.
The team met with Minister of Finance, Ms Mwanakatwe, Bank of Zambia Governor, Dr. Kalyalya, other senior officials, representatives of the Parliamentary Committees on budget and on trade and national economy, as well as financial market, business, and trade union representatives, civil society organizations, and development partners.
The mission will prepare a report of the Article IV consultation which will be discussed by the IMF’s Executive Board in the coming months.
At the conclusion of the mission, Ms. Goodman said discussed focused on policy options to lower debt-related vulnerabilities and support economic growth.
The Fund raised concerns over large fiscal deficits and rising debt service which it days have resulted in domestic expenditure arrears, taking a toll on growth.
“Our discussions on Zambia’s 2019 Article IV were frank and collaborative. This has been a valuable opportunity to take stock of the current situation and outlook for the economy and to gain a shared appreciation of current challenges and policy options going forward,” the IMF said.
“Growth is projected to slow from 3.7 percent in 2018 to 2.3 percent in 2019, lower than earlier envisages due to the impact of the drought on agricultural production. Inflation is close to the Bank of Zambia’s upper band and is projected to rise over the course of 2019. Reserves stood at 1.7 months of imports at end-March 2019.”
“Zambia’s development strategy targeting a rapid scaling up in infrastructure spending has resulted in large fiscal deficits, financed by nonconcessional debt. The 2018 budget deficit (commitment basis) reached 10 percent of GDP (7.5 percent on a cash basis), and total public and publicly-guaranteed debt including domestic arrears at end-2018 was 73.1 percent of GDP.
“With the recent increase in yields on government paper and higher interest costs on foreign debt due to the depreciation of the kwacha, government spending in other areas is being squeezed, including on social programs and transfers to local governments. The significant buildup in domestic expenditure arrears is weighing on households and businesses and presents a risk for the financial sector.”
It added, “To reduce risks, staff recommended a large up-front and sustained fiscal effort, including: avoiding contracting any new non-concessional debt, steps to raise revenues, halting the buildup of new arrears, and aligning the pace of spending on well-targeted public investment projects with Zambia’s available fiscal space.”
“With a diminished impact of the drought over time, and progress in addressing arrears, there is potential for growth to accelerate over the medium term. The mission welcomed the enactment of the Public Finance Management Act in 2018, which should strengthen management of public resources once the accompanying legislation has been enacted. Specifically, the passage of the Planning and Budgeting Bill will be important to enhance the project selection/appraisal process while the revised Loans and Guarantees Act would provide the necessary framework for medium-term debt management.”
Here we go again … expect more ZMK depreciation and higher bond rates. Who asked them to issue this statement?
@1 Is it because Zambia keeps borrowing?
BAMBA
Did you want them to hide the truth ???
Yes the Kwacha has depreciated even further today. While this is good news for some of us living abroad and investing in Zambia, it is not good for people living in Zambia, bar PF cadres and their leaders.
Why Lungu insists on borrowing, I do not know.
Where the borrowed money goes, no one knows.
This government can not even account for the Euro bonds.
And when you call them thieves, they arrest you for insulting the president, who happens to be a drunk, and a thief.
The biggest debt Zambia today has is Robber Edgar Chagwa Lampoon Lungu.
He and his PF MPs (and of course other MPs) are the biggest drain on national budget. These 160 persons eat 20% of National budget. You heard it right, 20% of National Budget is spent on 160 Robbers.
These robbers get tax free benefits, salary, free food, free travel, free housing, free gallivanting, free security, free free free free everything.
Abolish these positions. Let there be an overhaul and 100% freeze on salaries and allowances of these 160 people, a complete ban on their travel out of Zambia and no travel within Zambia. There are civil servants and officials all over Zambia, let them work in their districts.
Down with robber Lumpoon Lungu Edgar Chagwa and his minions.
This is like trying to tell a Zambia drunkard to stop drinking beer!
It cannot happen!
Look at JUNIOR in the photo…he looks silly now…no shame no shame.. you go and tell your auntie Maggie!!
nothing new in this statement just stating the ovious : avoid contracting new debt, dismantle domestic arrears blah blah blah. ..
I thought the team will tell us the current status. Whtat is the debt position as at 31/03/2019? How much are zambias reserves?
@Steve … absolutely nothing!!! And all the things they seemed to like especially the Public Finance Management Act 2018 is home grown pushed through by Margaret.
Even the Planning & Budgeting Bill is a brainchild of her’s and BoZ, everything they recommended we have already discussed and how much are we paying them for consultant fees???
It seems like they just came to earn fees on the back of an already debt ridden economy … real capitalism for you.
They don’t do this free and we are paying them huge amount we could have added to salaries for civil servants for absolutely nothing.
Again, our own economists and investment bankers could have produced a better document using their current salaries than Ms. Goodman here.
Epo mpelele,
BRM
So Zambia does have economists and investment bankers? And they can do a better job than the IMF?
Very funny.
Just remember one thing though. Zambia needs the IMF, begging for their help. IMF does not need Zambia.
Busy complaining about fees we are paying IMF.
Try complaining about gross theft, corruption, and abuse of office.
That luxury jet Lungu bought could have paid salaries beyond 2021.
B R M is a arse licker. id-iot. Zambia is better off all PF cadres and boolickers vanishing in thin air.
Miss Kenneth Kaunda who used to fire these robbers, stupid, ***** robbers
We have always known that Zambia is in deep matuvi. The reckless borrowing and spending and corruption of Jonathan Mutaware AKA ECL will bring the nation of Zed to its knees. Can we hear the cadres say ifintu ni fyototo again?
These are facts which they have discovered while they had these meetings with your PF government. I guess the truth hurts but there is nothing you can do apart from following their set guidelines. First you invite them to come and now you want to blame them for issuing this statement? Ba RB with all your knowledge but , nothing to show for it.
we have always said that the reckless borrowing, spending and stealing of gvt funds will bring zambia to its knees. this is not news, we brought this on our own. zambias docility has allowed its leaders to plunge its nation into the devils poor. no money in the pockets
INTERNATIONAL MONETARY FUND
Let’s have a provision in the laws of the land where an independent institution can fully manage the economic affairs of the Country.
In various articles, IMF seem to be so knowledgeable on how to implement monetary policies of the Country’s economy.
IMF must lead by example. Let a single Country allow IMF to manage that Country’s economy so as we see if that Country will be the best performer economically world wide.
Happy Labour Day…..!
Look at soiled BR BAMBA above hoping for the IMF to say something different from the truth…..the truth shall set you rats free
The IMF keep telling your PF not to borrow any more but keep borrowing……what do you expect them to say ?
We already did this reform in the 1990s. This time we should have been talking industrialisation and job creation metrics. But with the good judgement of you zambians of voting for the most clueless govt in the world, we are back to the same program.
And dont depend on your local unza educated economists in zambian institutions, apart from supporting everything pf does these people know nothing. They cant distinguish right from wrong. IMF did well to come tell them what they should know. Ati bank of zambia and ministry of finance officials atase! Why are are we in this situation if these people knew anything?
Cut and paste report produced when their darling Levy was President in 2005.
There is no value in these IMF reports except to make currencies favourable for Capital movements making inflows and out outflows gain from weak or strong Kwacha. Fact is after decades of no significant infrastructure development, creation of school places, health facilities and human capital, the people of Zambia have opted for the Pfs’ bold fiscal strategy to advance. Now no dropping out at Grade 7 coz of plenty of school places. Who would have thought it can happen so soon? Development is not a meek process. Ask the Chinese what they have had to endure and how often they have had to ignore the patronizing IMF.
What IMF has said is this. Reduce your blotted government and its unnecessary expenditure. SOme things are so easy, but the clowns that president Lungu has employed seem not to see this.
One important observation they’ve made though:’significant build-up of expenditure on arrears is weighing down on businesses, households and banking system ‘. Did this have to come from IMF? Hope someone has taken serious note
IMF be realistic, expenditure will continue for as long as ECL remains President. Otherwise, how do you think he will be re-elected?
If there are top two poor leaders in Zambia today, it has be ECL and Trib.al Hacks. In the absence of a viable option, the only reason why we would want to stick to ECL is because his adversary has the additional obnoxious dimension of trib.alism.