Finance Minister Felix Mutati says the 2018 National Budget has ably addressed concerns raised by the Executive Board of International Monetary Fund (IMF’s). He says Government this year embarked on an economic journey to restore fiscal fitness whose results have changed the outlook of the country’s economy.
The Finance Minister noted that since 2015 the IMF has produced Article IV Consultation with Zambia where they have acknowledged the critical reforms that government undertook in 2017 in the energy and agriculture sectors and the overall policy direction for the country. Article IV of the IMF is an instrument that governs the fund in providing guidance on the economic outlook of member countries.
Mr. Mutati explained that the Article basically outlines an assessment undertaken by the Fund in June this year, and offers guidance on issues Zambia must focus on going forward. He said Zambia has held specific conversations to secure a programme with the IMF. Mr. Mutati was said this in an interview soon upon arrival at the on-going IMF/World Bank annual meetings in Washington.
Last Friday, the Executive Board concluded Article IV consultation with Zambia at which they said that the near-term outlook for the Zambian economy has improved in recent months, driven by good rain and rising world copper price. However, Mr. Mutati says of importance to government is to address some of the issues Article IV has pointed out such as debt elevation, fiscal consolidation, and revenue mobilization. He, however, said most of these matters have already been addressed in the 2018 budget.
According to the Article: “The economy was in near-crisis from the fourth quarter of 2015 through most of 2016, reflecting the impacts of exogenous shocks and lax fiscal policy in the lead up to general elections. Low copper prices reduced export earnings and government revenues, while poor rainfall in the catchment areas of hydro-power reservoirs led to a marked reduction in electricity generation and severe power rationing.” The report also cites rising public debt at an unsustainable pace, which has crowded lending to the private sector and increased the vulnerability of the economy.
The IMF has commended recent improvements in Zambia’s economic outlook and has advised the authorities to take advantage of current favourable conditions and implement decisive and prudent macroeconomic policies. These include reforms to place public finances and debt on a sustainable path, build international reserves, increase the economy’s resilience to shocks, and achieve higher and inclusive growth. In this regard, they have welcomed the launch of Zambia’s Economic Stabilization and Growth Program and the Seventh National Development Plan.
“We aim to balance growth and prioritize infrastructure development with debt sustainability. This means that as we grow infrastructure we don’t continue to endanger our debt sustainability to high distress levels,” said Mr. Mutati, adding that “between now and the medium-term, government will focus on bringing debt down.”
He said the Government has so far developed a debt management strategy to serve as an important tool in guiding decision making with regard to prudent debt management.
The Minister also said the 2018 national budget is focused on reducing fiscal deficit to 6.1 percent. Mr. Mutati said Government to this effect has reformed legislation and is focusing on accelerating the management of systems in the coming year, to assist in fiscal consolidation. On domestic resource mobilization, the Finance Minister says Government has underscored the modernization of the Zambia Revenue Authority, including benchmarking its performance. The specific areas of modernization mentioned are automation, information technology, customer service, taxpayer education and enforcement. This he said also includes other government revenue collecting agencies.
He said the annual Meetings of the Boards of Governors of the World Bank Group and IMF, bring together central bankers, ministers of finance and development, parliamentarians, the private sector, civil society organizations and academicians to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness. Zambia and the IMF also meet annually as a requirement to assess the global outlook on economic stability and growth.