IMF Staff Concludes Visit to Zambia
End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.
At the invitation of the authorities, an International Monetary Fund (IMF) team led by Tsidi Tsikata visited Zambia during March 9-18 to review recent macroeconomic developments and discuss with the authorities how best to address the current economic challenges facing the country.
At the end of the mission, Mr. Tsikata issued the following statement:
“The Zambian economy is under intense pressure. Lower copper prices, electricity shortages, and poor rainfall have dampened the pace of economic activity. Moreover, inflation has increased, expenditure pressures have risen, and financing conditions have tightened substantially. The mission estimated that economic growth declined to about 3 percent in 2015. Resolute action is needed as quickly as possible to restore macroeconomic stability and pave the way for a return to high sustained growth.
“Government finances are under immense stress. Expenditure is running far above budget, in large part as a result of fuel subsidies and contracted emergency electricity imports that together are estimated to cost the treasury about US$660 million a year at the current pace (equivalent to 3.2 percent of GDP). At the same time, domestic and external financing options have become more limited along with rising interest rates. Mounting domestic arrears are adding to concerns about debt sustainability.
“Tightening of monetary policy has been effective in stabilizing the exchange rate but tight liquidity conditions have contributed to persistent under-subscription of treasury bills and bonds. However, there is little scope to loosen monetary policy as long as fiscal imbalances are not addressed. A key challenge going forward will be to normalize activity in the interbank foreign exchange market while avoiding a return of last year’s extreme volatility in the exchange rate.
“The mission and the authorities reached a shared understanding of the challenges and risks associated with the current economic situation. The authorities stressed that, notwithstanding the upcoming general elections, they are committed to addressing the budgetary pressures, including moving to cost-reflective energy pricing, and scaling back on discretionary spending while safeguarding social protection programs. They indicated that strong near-term measures are being evaluated and that, at the IMF/World Bank Spring Meetings in mid-April, they would provide further guidance on the policy direction and reforms, and their plans for an IMF-supported program.
“The mission is confident that Zambia’s current economic challenges can be overcome with resolute policy action, allowing a resumption of growth in line with the country’s abundant potential. In particular, a package of measures that makes clear that the fiscal pressures are being tackled would boost market confidence and pave the way for increased investment and growth. However, delays in implementing corrective measures will only worsen the situation, increase the adjustment cost and postpone the recovery.
“The team met with Finance Minister Alexander Chikwanda, Bank of Zambia (BoZ) Governor Denny Kalyalya, other senior government and BoZ officials, members of parliament, leaders of political parties, as well as representatives of the private sector, labor unions, civil society organizations, and Zambia’s development partners. The mission thanks the authorities and the other stakeholders it met, for their openness and the constructive spirit in which all discussions were held.”
IMF COMMUNICATIONS DEPARTMENT
Media Relations
E-mail: [email protected]
Phone: 202-623-7100
So out of 5 areas of concern expressed by IMF only expenditure is of govt doing. The rest are forces beyond govt. Ideally meaning the govt is barely to blame however proper planning is paramount for our economical recovery other than outright change of govt
And you think chikwanda can come up with a good plan. Let’s be serious people. Your man is being held at ransom. If EL can not remove people who can’t plan he should be removed period.
@chindo man up and let’s us face the problem head on. Of course government is to blame for all this mess. Surprisingly u still think that the country’s economy should continue to deteriorate at the the expense of just keeping ECL at the helm
@ Abazana Chindo
Can you understand English?
1. “…Moreover, inflation has increased, expenditure pressures have risen, and financing conditions have tightened substantially…”
2. “…that economic growth declined to about 3 percent in 2015. Resolute action is needed as quickly as possible to restore macroeconomic stability and pave the way for a return to high sustained growth…”
3. “…tight liquidity conditions have contributed to persistent under-subscription of treasury bills and bonds…”
4. “…a package of measures that makes clear that the fiscal pressures are being tackled would boost market confidence and pave the way for increased investment and growth. However, delays in implementing corrective measures will only worsen the situation, increase the adjustment…
An economy growing at 3%, in a country where more than 70% of the people are in poverty? This is a disaster! Second, there`s nothing strange in IMF`s report, e.g. the issue lower copper prices is not new. Zambia has been going thru this for decades, what Zambia has lacked is smart leaders to fix the problem. More than 70% of our earnings come from copper. What do you expect? What we need is to lower our dependence on copper at least bring it down to 50% or even 40%. Its very difficult but doable with smart leaders. In fact there`s no country in the world that has achieved meaningful development by depending on commodities. About electricity, where was the government all these years, watching Kariba Dam?
This sounds disastrous
The mission estimated that economic growth declined to about 3 percent in 2015. Resolute action is needed as quickly as possible to restore macroeconomic stability and pave the way for a return to high sustained growth.
This is what poor governance brings. Where are all our learned economists.
Dont blame the economists,blame the politicians. The problem is that politicians run populistic policies to wind wick the voters and most of the time these policies do not work but just put pressure on the economy.
The case in point is the directive by the republican president to reintroduce hard ship allowance for teachers in rural areas. The idea is very humane but can the economy sustain additional pressures as at now?
That is one example of a populistic policy which currently can not be supported by any fiscal policy. And because of extreme poverty levels, which economist can dare the Head of State?
We should not totally blame chikwanda but the technocrats as well. ABC is just a driver . The technocrats need to be up to speed. Do not be cheated the civil service can let even the biggest brains down. More the reason im sceptical about HH being a president because he has never encountered beaurocracy.
@ Abazana Chindo
“…ABC is just a driver…”
Who is the effing 1mbecile allowing this senile geriatric to drive peoples life in to the abbis of poverty? HH?
F*ck you and your scre*ed up reasoning.
We need to start making things that other people want to buy. Or we can provide services that other people can buy from us. As other people have indicated reliance on commodities is madness. The word diversification has been banded about since the 70s. We need it NOW!
Only Zambia has invited IMF in sadc region all because of visionless PF leadership. Nothing global about Zambia’s problems as they are self made by poor and useless Chikwanda and PF at large.The quicker this cursed party(PF) is voted out of Govt the better.
That why we need a complete overhaul of the entire system. These technocrats have been the from one got to another and that is why we still have the same and even worse problrms… I recommend a complete ov
Complete overhaul of the civil service
NO, you are wrong. What is needed is a COMPLETE OVERHAUL of the EXECUTIVE.
Stop blaming soldiers and sergeants. It is DECISION MAKERS CORRUPT INCOMPETENCE WHICH NEED OVERHAULING.
We need to blame the technocrats. They are the experts and I don’t see why Zambia has not developed economically after 50 years of independence. These guys are just booylickers instead of giving professional advice, they are the ones misleading the politicians
NO, you are wrong. What is needed is a COMPLETE OVERHAUL of the EXECUTIVE.
Stop blaming soldiers and sergeants. It is DECISION MAKERS CORRUPT INCOMPETENCE WHICH NEED OVERHAULING.
We shall recover soon…
How,they work under pressure with directives daily from politicians! you will one day work in these offices.
we really need hh in state house now.we have failed, let him come and do some magic like akadabra dabra and biiing akabunga 5pin, dollar biiing 1pin, biiing kariba dam full and he will finally instruct the chinese to purchase copper @ 400000000000.
Zambia has a failing economy bcoz we have PF buffoons who care more about their political stomachs than effective management.PF = less money in our future.
Steadfastness and consistency in policies is the wa forward. Zambian governments always start well but continue to look over the shoulders leads to backpedalling. Whatever government comes in after 11/8 will not change if politically they continue with populism and patronage. We need strong oversight institutions and not strong leaders who just turn to dictatorship when the road ahead turns out to be bumpy.
lol blame this blame that one.such a syndrome wont take us anywhere.the qustions is what are the factors that cause our economy to be in such a state,afterwards,provide an amicable solution to the problem.what are the mitigations to such problems.evryone is involved but decision makers just have a large influence.
what is the solution to these challenges? can someone say one or two answers
So far, I can’t hear anything promising from the opposition. All they do is just yap, yap and yap! Smear campaigns have cost one great Kalu the presidency of FAZ. The same is likely to happen to the political opposition, bent on a smear campaign without seriously addressing the challenges the country is facing. What an average Zambian wants to hear is the ‘HOW’ part of the campaign. We all can see the problems, without having to be reminded of them every day. Please, tell us what exactly you are going to do to change the status quo!
Diversification of all sectors of the economy and it should be up scaled not in a sluggish manner as in the past
Lest we forget let’s remember the following.
When copper prices were high the mining houses who have been blackmailing Government and ZAMBIANS, opposed the introduction of the Windfall taxes which would have meant that we would have been swimming in dollars instead of borrowing bond money today which has contributed to the falling Kwacha.
Guess who opposed the Windfall taxes?
HH no less. Omm