Zambia’s economy improving but risks still remain-IMF

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The International Monetary Fund (IMF) says the near-term outlook for the Zambian economy has improved in recent month mainly driven by good rains and positive sentiments in the financial sector.

And the IMF says it may grant Zambia up to $1.3 billion in a three-year credit facility to help address a budget deficit of around 7 percent.

Addressing a news conference after the conclusion of its mission team to Zambia, staff leader Tsidi Tsikata said there has been increased foreign investor participation in the government securities market which has boosted the economy.

Mr Tsikata said a bumper harvest and increased hydroelectricity generation are expected to boost economic activity by more than previously projected.

He said the IMF staff project real GDP growth to improve slightly from the revised official rate of 3.4 percent in 2016 to about 4 percent in 2017.

“We also project the annual inflation rate (6.5 percent in May) to remain at single-digit levels, notwithstanding the impact of the move toward cost-reflective electricity tariffs,” he said.

Mr. Tsikata stressed that improved fiscal performance and discipline are needed to sustain market confidence.

“Fiscal performance in the first four months of 2017 was mixed relative to budget estimates. Total domestic revenue (tax and nontax) fell short of the projected level while total expenditures appeared to be broadly in line with the budget,” he said.

He added, “However, on the expenditure side, while the government has cleared substantial arrears, it appears that new arrears may be emerging. The government is taking steps to strengthen commitment control, including by expanding the coverage of the Integrated Financial Management Information System (IFMIS) to all central government agencies.”

Mr Tsikata said other remaining fiscal measures relate to reduced spending on the Farmer Input Support Program through improved targeting of beneficiaries and limiting maize purchases to the level in the budget.

“Weaknesses in the management of public finances and public investment pose significant risks to the 2017 budget objectives of “restoring fiscal fitness for sustained inclusive growth and development” and scaling up social spending.”

“In that context, IMF staff welcomed the heightened attention and efforts underway to strengthen the legal framework for managing public resources, including the introduction of the Planning and Budgeting Bill, and amendments to the Public Finance and Public Procurement Acts. IMF staff urged the authorities to continue strengthening their public debt management capacity in order to underpin their efforts to put public debt on a sustainable path.”

“Against the backdrop of contraction of credit to the private sector and a benign inflation outlook, IMF staff welcomed recent further easing of monetary conditions by the Bank of Zambia (BoZ). In view of growing nonperforming loans in banks and non-banks, the mission welcomed BoZ’s efforts to strengthen its supervision of the financial system, including with technical assistance from the IMF.

Meanwhile, Mr Tsikata has revealed that the Fund may grant Zambia up to $1.3 billion in a three-year credit facility to help plug a budget deficit of around 7 percent.

He said a decision will be made by the IMF board in August.

“We aim to reach understanding in the coming weeks that would form the basis for presenting the authorities’ request for an ECF (Extended Credit Facility) arrangement and report on the 2017 Article IV consultation to the IMF board in August 2017.”

10 COMMENTS

    • @abilima:
      Ar.sewhores like you don’t realise that we have been promised that Loan since 2014 and yet nothing has happened up to now!!
      Ask yourself why the loan application has become so protracted Ar.sewhore!!

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  1. Wait till August 2017 over political events and end up being told to wait further.
    Facts can be subversive sometimes and time is ticking to deliver to expectations of Zambians.

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  2. So Mutati wants to borrow money from IMF to finance Recurrent Expenditure (Consumption). Why cant he reduce total expenditure instead of borrowing or increasing taxes? Does Mutati realistically think that the IMF Board will approve a Loan to the Lungu govt with HH being persecuted in Mukobeko? For the IMF to lend to Zambia there has got to Respect for Rule of Law, Good Governance, adherence to Constitutionalism and Respect for Human Rights. All these requirements are absent in Zambia under Dictator Lungu. Mutati and Lungu can forget about IMF Loan and Western Donor Aid. The continued persecution of HH constitutes Gross violations of Human Rights . So Lungu should forget about IMF Loan until all these toxic issues are resolved.

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  3. In view of growing nonperforming loans in banks and non-banks, the mission welcomed BoZ’s efforts to strengthen its supervision of the financial system, including with technical assistance from the IMF.

    Nonperforming loans has nothing do with supervision of financial system. IMF are now colluding with the biggest Ponzi Scheme called and Lungu and PF -Fools. The commercial borrowing rates are between 40% and 60%, inflation is running between 25% and 35% and the exchange rate is £1 to K12,000 and $1 to K10,000. PF- fools keep, abnormally, every month, understating the rate of inflation but the real verdict is on the peoples kitchen tables.

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  4. In view of growing nonperforming loans in banks and non-banks, the mission welcomed BoZ’s efforts to strengthen its supervision of the financial system, including with technical assistance from the IMF.

    Nonperforming loans has nothing do with supervision of financial system. IMF are now colluding with the biggest Ponzi Scheme called and L-ungu and PF -Fools. The commercial borrowing rates are between 40% and 60%, inflation is running between 25% and 35% and the exchange rate is £1 to K12,000 and $1 to K10,000. PF- fools keep, abnormally, every month, understating the rate of inflation but the real verdict is on the peoples kitchen tables.

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  5. Is Mutati seriously asking for an IMF Loan when the Lungu govt is busy persecuting HH and others in Mukobeko Prison? HH is a Political Prisoner and should not be treated as a Convict. Its only after being convicted that HH can treated as a Prisoner. Right now HH and his workers are mere suspects and are innocent until found guilty of Treason by the High Court. What is happening in Mukobeko is Gross Violation of HH and his workers’s Rights. These are crimes against humanity being committed by Lungu and his Criminal Advisers. Lungu will not go unpunished for these crimes. IMF cannot be seen to be financing the Persecution of HH and his workers. Mutati should bid goodbye to the IMF Loan and Western Donor Aid.Period.

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  6. The USA government have loans in trillions. Right now Trump cannot full fill his pledge to work on the infracture be the budget is not enough.

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