IMF bailout: Zambia’s biggest 2022 economic feat
Published On December 21, 2022 » 1586 Views» By Times Reporter » Business, Columns
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AS we continue highlighting some of the economic issues which were covered this year, today we focus on the International Monetary Fund (IMF)-bailout feat.
In my view, Zambia’s acquisition of the IMF programme was one of the biggest economic feats, if not the biggest one posted in 2022.
This is because apart from availing some resources to the government it also provides for the policy guidance to achieve greater economic development.
Above all, it enhances financial prudence in government dealings.
As I indicated in my article titled, “IMF bailout: long and meandering road,” on September 2, this year, the journey to Zambia’s acquisition of the IMF support programme has been a long and meandering one.
This is because the issue of the IMF financial bailout to Zambia had been a topical one in the southern African country for almost a decade.
For instance, the Patriotic Front (PF) government administration, particularly under former President Edgar Lungu, vainly jostled for the programme up to the time of its exit.
Government officials, past and present, economic experts and others had on many occasions explained why the country needed the IMF programme.
Within 12 months of being in government, the New Dawn administration received the package as the IMF executive board approved the 38-month arrangement under the Extended Credit Facility (ECF).
The package involves US$1.3 billion, an amount equivalent to 100 per cent of the Zambian IMF quota.
This author had, in several articles, projected that Zambia would get the package this year because of the massive goodwill it had been receiving from the international community in the last one year.
Without politicising the matter but at the risk of sounding political, one noted that the PF failed to get the support mainly due to policy inconsistency as well as lack of transparency in debt acquisition and management.
This programme was based on Zambia’s homegrown economic reform plan that aims at restoring macroeconomic stability and foster higher, more resilient, and more inclusive growth.
According to the IMF, Zambia is dealing with the legacy of years of economic mismanagement, with an especially inefficient public investment drive.
In the past 10 years, the average economic growth has been too low to trim down rates of poverty, inequality, and malnutrition that are among the highest in the world.
The ECF-supported programme is helping to reestablish sustainability through fiscal adjustment and debt restructuring.
It has created fiscal space for social spending to cushion the burden of adjustment and strengthen economic governance, including by improving public financial management.
The programme was also projected to act as a catalyst for the
much-needed financial support from other development partners.
Restoring fiscal sustainability requires a sustained fiscal adjustment and hence Zambia’s adjustment plans aptly focuses on eliminating regressive fuel subsidies, enhancing the efficiency of the agricultural subsidy programme and reducing inefficient public investment.
Domestic revenue generation also needs to support the medium-term adjustment.
The adjustment is creating fiscal space for increased social spending to cushion the burden on the most vulnerable, help reduce poverty, and to invest in Zambians.
This has led to expansion of the Social Cash Transfer programme and plans are underway to increase public spending on health and education.
According to experts, Zambia needs a deep and thorough debt treatment under the G20 Common Framework to restore debt sustainability.
Further, Zambia needs an ample strengthening of fiscal controls to support the fiscal adjustment, as well as address governance and corruption susceptibility.
According to the IMF, the Zambian government needs to reinforce public investment management and procurement practices to ensure transparency and the efficient use of scarce resources.
It would also be important to reinforce the framework for monitoring fiscal risks, particularly those related to large state-owned enterprises.
Under the arrangement, the Bank of Zambia will continue with its efforts in the reduction of inflation and preservation of financial stability.
Reacting to the report of IMF board’s approval of the programme then, President Hakainde Hichilema said the move was a vote of confidence inthe Zambian Government and its people.
“The international community has recognised the progress we have made, and our commitment to reviving our economy and becoming a responsible member of the family of nations,” the overjoyed president said in his facebook post yesterday.
The IMF’s approval of the programme for Zambia brought to a rest the protracted and meandering trip that Zambia had been on for about a decade.
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