By James Muyanwa –
ZAMBIA has been a member of the 79-year-old International Monetary Fund (IMF) since 1965, a year after the dawn of the southern African country’s political independence.
Since then, the copper-rich country has had 13 arrangements with the fund. On August 31, 2022, the IMF announced its executive board’s approval of the 38-month $1.3 billion Extended Credit Facility (ECF) arrangement for Zambia.
According to the fund, Zambia’s programme, supported by the ECF arrangement will advance the government’s homegrown reform plan to restore debt sustainability, create fiscal space for social spending and strengthen economic governance.
Effectively, the IMF thinks Zambia’s securing timely restructuring of agreements with external creditors is of critical importance.
IMF Managing Director, Kristalina Georgieva, is currently visiting Zambia from yesterday to tomorrow under the theme, “Building a more resilient and inclusive future in Sub-Saharan Africa.”
The Bulgarian economist who has been at the helm of one of the Bretton Woods Institutions since 2019 is scheduled to meet with President Hakainde Hichilema, Finance minister Situmbeko Musokotwane and Bank of Zambia Governor Denny Kalyalya to discuss Zambia’s reforms agenda.
According to the fund, Ms Georgieva’s agenda also includes a town-hall event with University of Zambia students as well as meetings with school leaders, social cash transfer beneficiaries, private sector representatives and Civil Society Organisation leaders.
Ms Georgieva gave her first interview in Zambia to our Business Editor, JAMES MUYANWA, who has been following IMF issues for more than 10 years. The two-part interview covers topics ranging from the purpose of her visit to Zambia to the much-talked-about-and-dreaded IMF conditions on its support programmes, as follows:
JAMES: Could you tell us why you are visiting Zambia? Why is it important for you to be here now, and what will you do in the next days?
MS GEORGIEVA: Thank you for inviting me to share a few thoughts with your readers.
Let me say, at the outset, how proud we at the IMF are to partner with Zambia, and how impressed we are with your country’s economic reforms efforts.
This is a fantastic foundation to discuss next steps in our cooperation. In that sense, it’s very important that I hear directly from Zambians how the Fund can best continue supporting your journey towards a more resilient and inclusive future—with more jobs and less poverty.
With H.E. President Hichilema and his team, I look forward to discussing ways to build on the important progress Zambia has made in stabilising the economy as a first step toward the goals of promoting growth and boosting investment.
Over the past year, inflation has come down and growth has been stronger than expected, despite a very challenging situation in the global economy.
This is a quite an achievement and a positive reflection on the efforts of Zambia’s people and businesses, and the government’s reform program!
And I am excited to travel outside Lusaka for a bit to see more of your beautiful country and learn about conservation efforts.
JAMES: You said in recent interviews that we should expect a tough year in 2023, with inflation, climate change, and food insecurity being three of the key challenges. How does that impact Zambia, and what are your views on the economic outlook for Zambia?
MS GEORGIEVA: Indeed, global headwinds are making this a tough time for many countries. Zambia is no exception.
This includes Russia’s war against Ukraine, which has led to spikes in global energy prices. But we also see slow growth in major economies such as the US, the Euro area, and China.
And, of course, the biggest existential crisis of all—the ongoing impacts of climate change. You see the affects here.
Climate change is creating more uncertainty in rain patterns, making life difficult for local farmers, and triggering energy shortages given Zambia’s reliance on hydropower.
For Zambia, this means that domestic reform efforts will have even more significance. For example, it will be even more critical for Zambia to reform its agricultural policy to better support farmers reliant on rain-fed agriculture, but also, in general, to diversify energy sources towards other renewables.
And the good news is that despite challenges, I see reasons for optimism. For instance, we expect growth in Zambia to accelerate and recent increases in the cost of living should remain contained.
This will help create a stable environment for businesses, increasing their confidence to invest and create jobs.
I would, however, conclude with a cautious note. It has become increasingly apparent in recent years that we live in a more shock-prone world—and that is why it is so important that we focus on making our economies—and our societies and our planet—more resilient.
JAMES: What are some of the activities which are scheduled to, or must, be implemented in 2023 in connection with the IMF supported programme? Any timeline?
MS GEORGIEVA: The best resource for your readers is the Government’s reform plan supported by the IMF. This is publicly available on the websites of both the IMF and Zambia’s Finance Ministry, and it is in line with Zambia’s Eighth National Development Plan.
In terms of specific commitments for 2023, let me highlight three:
First, the Government has committed to a budget that supports growth and vulnerable families, while restoring debt and fiscal sustainability.
Second, the Government has committed to submit to Parliament a new Public Private Partnership (PPP) Act that will seek to strengthen the framework for PPPs.
Why is that so important? Because it will help better manage the fiscal risks around PPP activities, and help ensure they are a better investment for both Zambia and the private sector.
Third, investing in people is a huge part of building resilience and the IMF-supported program contains targets on increasing the level of social spending in areas like health, education, and social protection.
The aim is to help improve the quality of life for Zambians—especially those facing poverty.
JAMES: What could be the best way of handling Zambia’s debt with both external and internal creditors? What is the target relief level expected from debt restructuring or renegotiation?
MS GEORGIEVA: Let me stress that Zambia is taking very important steps to restore debt sustainability. These involve reforms to improve the effectiveness of spending, including by removing untargeted fuel subsidies that disproportionately benefitted wealthy households. And it includes steps to raise tax revenues.
While these measures are ambitious, they alone cannot restore debt sustainability. So, Zambia is seeking a reduction in its debt burden from its external creditors, through the G-20 Common Framework for debt treatments. These discussions are complex and challenging, but Zambia is doing its part and we hope to see an agreement in the coming months.
The IMF is supporting the Government in its debt restructuring efforts. Based on the IMF-World Bank analysis of Zambia’s debt situation—what we call a “debt sustainability analysis”—we have provided an assessment of the amount of debt relief that Zambia needs.
The goal is to reduce Zambia’s debt payments to levels that are consistent with its capacity to pay, accounting for the level of economic development—both current and future—and budget challenges.
(Look out for the second and final part of this interview tomorrow)