Minister of Finance Felix Mutati has this afternoon left for the 2017 Annual Meetings of the IMF and the World Bank to be held in Washington DC, USA. On departure, the Minister made the following statement;
“The Government has made significant progress on the reforms outlined in the Economic Stabilisation and Growth Programme. The issues on which we have made progress so far are:
1. Undertaking to limit projects to those that require completion as reflected in the 2018 budget;
2. Action to restore fiscal prudence by embarking on reforms which enshrine fiscal management in law, including the review of the Public Finance Act, Public Procurement Act and the Bank of Zambia Act;
3. Further, presenting the Planning and Budgeting Bill for consideration by the current session of Parliament; and,
4. Debt reforms.
With regards to the outcome under Article 4, we recognise that our debt risk has been revised from moderate to high. Looking back, the Government’s own assessment of debt risk under the recently conducted debt sustainability analysis corroborates the assessment by the IMF.
Going forward, the Government is therefore defining a path for sustainable debt contraction as indicated in the newly published Medium Term Debt Strategy (MTDS). Further, the Government is moving ahead to enact a new Loans and Guarantees Authorisation Act in the current sitting of Parliament.
Further, Government has commenced the enhancement of capacity in debt management by restructuring the debt function in the Ministry to respond to the new challenges. New staffing and capacity development has also been embarked on.
The Government will, based on these policy reforms, be issuing directives on these matters to ensure clarity for the public. The Government will not slow its reform efforts aimed at reducing the fiscal deficit and slowing debt accumulation, whilst these discussions continue.
The 2018 budget for example, envisages a decline in the fiscal deficit from the projected 7.3% of GDP in 2017, to 6.1% of GDP in 2018. This is fundamental affirmation of the way debt management will be pursued. These policies, as stated earlier, are based on the Economic Stabilisation and Growth Programme (ESGP) and the 7th National Development Plan (7NDP).
I am pleased that the ESGP and the 7NDP have both been welcomed by IMF Board Members during the Article IV discussions. This is positive feedback and we should build on it. To put the status of the envisaged IMF Programme in context, our shedule in Washington DC will include deliberations on the next steps in engagement with the Fund. The discussions in Washington will be aimed at setting the next steps forward after which the public will be informed.
At the end of a roadmap that we will agree, and after the Board has considered the submission from the staff and the relevant office at the Fund, only then would we know whether the IMF Board has approved our program or not. So far, there are no indications that our programme will be rejected.
The next engagement, once agreed, will take into account the measures being undertaken on debt reforms; defining borrowing parameters and taking into account the outcome of the latest assessment under Article 4, the new Medium Term Expenditure Framework (MTEF) and the 2018 budget.
Note that, Cabinet in March 2017 authorized that Government engages the IMF in discussions to embark on an economic supported progrmme with the IMF. The Government and the IMF have thus engaged in discussions since April this year but more intensely in June when a mission visited Zambia.
The discussions in June were based on reforms Government has embarked on under the Economic Stabilisation and Growth Programme. The reforms included those undertaken in the different sectors including energy and agriculture and reforms in public finance management. These reforms have the aim of restoring fiscal prudence and addressing debt that the Government agrees is increasingly becoming strenuous.
These reforms also cover the strengthening of the legislative framework governing the financial sector, to ensure that it is more resilient and better supports economic growth.