The International Monetary Fund has ruled out any possibilities of entering into an economic and reform programme with Zambia until after the August 11 elections.
IMF Director of the African Department Antoinette Sayeh told Journalists at the IMF Headquarters in Washington D.C on the sidelines of the Springs Meetings on Friday that the Fund does not see the full preparation of that program until the fourth quarter of 2016 which is after the elections in Zambia.
The Zambian Government has approached the IMF for a bailout believed to be in the region of US$1 billion mainly for balance of payment support.
President Edgar Lungu had hoped that the IMF programme would kick-in as early as April but his team of technocrats at the Ministry of Finance proposed that the tough austerity measures that come in with the programme could be implemented after the elections.
The IMF staff mission that visited Lusaka last month however turned down that request.
And Ms. Sayeh confirmed during the press briefing that the Zambian government has approached the IMF for possible lending.
“Zambia has also indicated to us that they would certainly be interested in discussing and pursuing an IMF supported program and we remain open to beginning those discussions. Of course, and we have in the context of these Spring Meetings had our usual discussions that we do with all country authorities including Zambia,” Ms Sayeh said.
She added, “And we expect that those preparatory discussions will be a good underpinning for ultimately preparing a program that the Zambians would want to take forward, but we don’t see the full preparation of that program until the fourth quarter of this year, after the elections in Zambia.”
Asked on whether borrowing externally will be the best option for Zambia and the possibilities of Zambia not falling into another death trap, Ms Sayeh said the IMF is concerned about Zambia’s borrowing.
“We certainly have our own concerns about borrowing and too much borrowing. Zambia of course borrowed on the issued sovereign bonds at high rates.”
“The proceeds of those bonds were used to finance some infrastructure, but also to cover the regular budget deficit including current expenditure and in light of the expense of that financing that was certainly not the best use of very expensive financing,” she said.
“And our advice to the Zambians has been to really quickly work to put in place measures to reign in the huge fiscal deficit that is underpinning that borrowing and to adjust its spending pattern which is heavily driven also by current spending including the wage bill and to really work towards containing the deficit with a view to reducing its borrowing requirements.”
Ms Sayeh said that is the only way to reduce the borrowing requirements and to contain the deficit and to make sure that the deficit that needed to carry forward for development purposes are used to the best possible needs with high quality investments.