The International Monetary Fund has clarified that the Zambian Government did not request for an aid programme with the IMF during a recent mission visit to Zambia.
IMF Director of Communications Gerry Rice explained that the Zambian Government did not and have not made any request for a programme from the Fund.
Mr Rice was speaking on Thursday at the IMF Headquarters in Washington during a news briefing.
‘On Zambia, the question is it’s reported that the IMF proposed a billion facility which the President had turned down. A sticking point for the President was the insistence by the IMF that the government commit to drastic reductions in expenditure, particularly on road construction. What is the IMF’s response? Well, just to be clear, the Zambian authorities did not and have not requested a program with the IMF,’ Mr Rice said.
‘But just a bit of context. There was an IMF staff team in Zambia during November to review recent economic developments and have discussions with the authorities. What was agreed was that the authorities and the IMF staff would remain closely engaged in the period ahead, and the Zambian authorities undertook to conduct internal consultations based on the outcome of the mission, which I mentioned.’
‘That’s where we are. So, again, just to be clear, no request as yet for a program from Zambia,’ Mr Rice said.
But Highly placed sources at the Zambian Ministry of Finance had revealed that the IMF had offered Zambia a US$1 billion aid package to resuscitate the ailing economy at the invitation of the Zambian government.
The sources indicated that the deal fell through after President Edgar Lungu refused to accept the austerity measures that the IMF staff mission had attached to the aid package.
The IMF team demanded that Government slows down on its infrastructure spending, increases electricity tariffs, cuts fuel subsidies and bans non essential foreign travel.
The sources stated that President Lungu refused to sign up to the deal as he feared the austerity measures would make the PF very unpopular heading into an election year.
The sources further revealed that President Lungu’s response left Finance Minister Alexander Chikwanda highly frustrated as he is the one who invited the IMF team into Zambia seeking their intervention.
It is believed that Mr Chikwanda was left frustrated and contemplated resigning which forced President Lungu to u-turn and announce a raft of austerity measures at his first news conference and that his administration is still keeping the door open for the IMF to return in March next year.
‘What they are not telling you is that the Zambian situation is now desperate and there is no way out apart from the IMF. How do you bring in the IMF to just come and monitor when you don’t have a programme or even considering one with the IMF? It does not work like that,’ the source said.
‘Watch what will happen in March, if they show seriousness in the way they are manner they will implement these austerity measures, then they will surely sign up to at least a US$1 billion bailout package by the end of the first quarter,’ the source added.
‘You have seen the urgency in increasing the power tariffs, no new procurement of infrastructure works unless those already budgeted for and whose financing is agreed. The President has cancelled the France trip for the Cop 21 and Zambia sent a smaller delegation there. Next will be fuel prices review and a lot of other measures, all these are aimed at pleasing the IMF so that when they return in March, a deal would be imminent,’ the source said.