Why does Minister Mutati provide half-based information on economy?

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Finance Minister Felix Mutati
Finance Minister Felix Mutati

The minister hides when the economy loses its head

Whenever the economy loses its head, the Minister of Finance hides from the Zambian public. And whenever there is a slight signal of macro-economic improvement, he comes out of the hiding to make incomplete statements. That is why, I have decided to reproduce the report of the IMF staff made public in October 2017 about the Zambian economy. Surely, the dark messages in the IMF report such as on debt couldn’t have improved so fast as the Minister implies in his Lusaka Times article of Friday 26 January 2018, could it? The Minister is renowned for making lopsided statements of good things only but conceals other important aspects of the economy that he deliberately fails to mention. For example, the IMF is lamenting about (i) rising debt, the Minister is saying it is reducing and, the IMF says, “Advice on fiscal policy was not followed” but Government says, “At the conclusion of the meeting, the two Ministers called on the Cooperating Partners to continue their collaboration with the Zambian Government to mutually achieve development interests.”

The full reproduced IMF report is below.

Zambia : 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Zambia

Author(s):
International Monetary Fund. African Dept.
Published Date:
October 2017

Context: Shocks, Policies, and Vulnerabilities

1. The Zambian economy was in near-crisis in 2015Q4 and most of 2016, reflecting the impacts of exogenous shocks and lax fiscal policy. Low copper prices reduced export earnings and government revenues, weakening the kwacha. Poor rainfall led to a contraction in agriculture output in 2015, and to a sharp drop in hydropower generation. Severe power rationing contributed to a marked slowdown in the pace of economic activity. Government spending was significantly above budget while revenues underperformed. Tightened financing conditions during 2016 and lack of expenditure restraint in the lead up to general elections in August, resulted in the government accumulating substantial arrears.

2. Monetary policy carried the burden of policy adjustments. Tightening of monetary policy in 2015Q4 helped to stabilize the exchange rate and lower inflation. The ensuing liquidity crunch combined with government arrears and subdued economic activity put the financial system under considerable stress. Non-performing loans (NPLs) rose sharply, credit growth plunged, and the Bank of Zambia (BoZ) took over a small bank and intervened in three nonbanks in late 2016. Since November 2016, with inflation receding and the emergence of exchange rate appreciation pressures (reflecting capital inflows and weak demand for imports), BoZ eased monetary policy considerably by unwinding administrative and quantitative measures it employed to tighten liquidity in 2015.

3. Public debt has been rising unsustainably. It increased from 36 percent of GDP at end-2014 to 61 percent at end-2016. External debt now accounts for 60 percent of public debt, making the portfolio highly susceptible to exchange rate risk. Government securities account for about half of domestic debt, with commercial banks and foreign investors holding about 40 percent and 17 percent of the total, respectively. Public debt is crowding out lending to the private sector and making the economy vulnerable to capital flow reversals.

4. The government has initiated important fiscal reforms, but is ambivalent on its commitment to debt sustainability. It has reduced regressive subsidies in the energy sector and is implementing reforms to enhance the efficiency and focus of subsidies in the agriculture sector. However, the pace and scale of contracting new loans for capital projects—sometimes before appraisals are ready—are inconsistent with stated debt sustainability objectives.

5. The near-term economic outlook has improved, driven by good rains and rising copper price. A bumper harvest and increased hydro power generation are expected to boost real GDP growth to 4 percent in 2017 from 3.4 percent in 2016. Inflation is projected to remain within the authorities’ target range of 6-8 percent, reflecting recent appreciation of the exchange rate. Increased foreign investor participation in the government securities auctions since late-2016 has eased the government’s financing constraint and supplied foreign exchange to the domestic market. With copper accounting for about 70 percent of Zambia’s export earnings, the recent increase in the world price—from about US$5,700 per metric ton in December 2016 to nearly US$6,500 in August 2017—has brightened the economy’s prospects.

6. The government has launched its Economic Stabilization and Growth Program (ESGP) and the Seventh National Development Plan (7NDP). The ESGP (2017-2019) aims at restoring macroeconomic stability and creating conditions for sustained growth, with a heavy emphasis on public financial management: enhancing resource mobilization, refocusing public spending on core public sector mandates, scaling up social protection programs, strengthening accountability and transparency in the use of public resources, and restoring budget credibility. The 7NDP outlines the medium-term strategy for creating jobs, encouraging economic diversification, and supporting human capital development, with the overarching objectives of reducing poverty and inequality.

7. Rising political tensions pose risks. Following closely contested general elections in August 2016, political tensions rose between the ruling Patriotic Front party and the main opposition United Party for National Development (UPND). Tensions heightened when the UPND leader was charged with treason and jailed in April 2017. Following mediation by national religious leaders and the Commonwealth Secretariat, the UPND leader was released in August, and the treason charges have been dropped. In response to a series of arson attacks on markets and electricity infrastructure, on July 5, 2017 President Lungu declared the existence of a situation that could degenerate into a state of emergency if not addressed.

8. IMF staff and the Zambian authorities have held discussions on a possible Fund-supported program. Further progress will require greater clarity on fiscal policy commitments and aligning the government’s borrowing plans to achieving public debt sustainability.

9. Implementation of past IMF policy advice has been mixed. Advice on fiscal policy was not followed. Some progress was made on structural fiscal reforms, but weaknesses in commitment control persist, resulting in the accumulation of arrears. In line with staff advice, BoZ maintained a tight monetary policy stance in 2015 and most of 2016. The level of international reserves has declined, but BoZ has been opportunistically purchasing foreign exchange from the market.

Recent Economic Developments and Near-Term outlook
10. Economic growth is beginning to recover. After averaging 7 percent a year during 2005-2014, real GDP growth dipped to 2.9 percent in 2015, reflecting the dampening impacts of low copper price, power rationing, government arrears, and restrictive monetary policy. Growth picked up to 3.4 percent in 2016, driven mainly by mining activities and private construction. A bumper harvest and increased hydro power generation are expected to lift growth to 4 percent in 2017.

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22 COMMENTS

    • Is the heading of the article supposed to read: “Why does Minister Mutati provide half-baked information on economy?” I wonder.

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    • The working environment lungu has created require morally bankrupt people. The president himself is a hardened thief so it follows that his henchmen and women must be fashioned in the same mold.

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    • he’s half-baked character who failed ACCA 3 times in UK. He has no fiscal discipline, is clue-less of growing the economy besides going round the world with a big begging bowl to suffocate the country with DEBT.

      His behavior is like a small boy who goes to play in his only school uniform. When it gets holes on the bumz, he hides his back-side from view of his parents, his friends, his teachers etc.

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    • Simple the guy is a thief. Who does he represent anyway, MMD in the PF government. How does that work.

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  1. …but we are all aware of these statistics, no??? So what’s the objective of publishing this story??? daft article, really!!!

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  2. I hope you at least also read the one 2018 article 5 consultation for Nigeria or one for Egypt or South Africa and seen the similarities
    If IMF gives you the commentary you read it and compare and flex to ensure the fiscal monitor you have is within. Read it with positive resolutions to rebalance and ensure you achieve the focus Sometimes the minister is quiet because he is working and some information may be non-public for competitors and others who may want to take advantage of GRZ asset positions until he comes public, people change their positions to reflect but any well informed person will know even before the minister announces and to ally…

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  3. to allay uncertain in the economy and markets ,he at least has tried this can be seen from the disclosures in this article 5 by IMF and World bank Outlooks and BOZ MPC and Ministry of Finance statements that You ca do a technical analysis or mosaic theory to beat the information gaps from the Minister Such gaps normally field in at Ministerial Statements and Budget Announcements and forums alike
    Altleast the Zambian economic outlook 2018 is brighter and will be reflective in the IMF fiscal monitor indicators 2018 ,given also the confidence in our economy from IMF lead consultants charged with Zambia

    It’s good to note for good reasons that the only…

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  4. country that has received funding or financing gap from IMF recently 2017/2018 is Egypt

    Like any fund that has to perform and be perpectual,it should employee best risk measures and only lend with a sure view than performance would be there Agreed the Composition of GRZ debt and term structure was inaccurately presented and accuracy for stress testing was lacking even though IMF new the figure of total Zambia debt (marketable and non-marketable This should have included comprehensively the intra Gov debt

    No matter the amount of data if IMF wants to lend to you like the case of Egypt, they will soften and give but only if certain that there…

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  5. would be most likely performance to the fund .If you see the “” VAR in the sense ” they normally are risk averse, mostly would provide risk analysis in those quadrants optimist ,pessimistic or neutral for the long-term performance in a forward looking manner IMF is very capable and has the data forecast for Zambia not to know the positions even when Honourable is presenting
    So what you need to be doing is not to work on your own AFMIS and reflect the commentary from IMF as part of your plan in the Zambia plus home grown programme for long-term

    On the positive side ,the IMF report is a good self-appraisal article 5 never a solid cast stone Consideration…

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  6. Consideration of Geopolitics in funding will help you also

    See below an extract for Nigeria and look for the real options in it Notice the similarity in wording for all article 5

    An International Monetary Fund (IMF) staff team led by Amine Mati visited Nigeria during December 6-20, 2017 to conduct the 2018 Article IV consultation. Following the conclusion of the visit, Mr. Mati, Senior Resident Representative and Mission Chief for Nigeria at the IMF, issued the following statement:

    “Overall growth is slowly picking up but recovery remains challenging. Economic activity expanded by 1.4 percent year-on-year in the third quarter of 2017—the second consecutive quarter of positive growth after five quarters of recession—driven by recovering oil production…

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  7. All in all the disclosure in Parliament BOZ website MOF IMF or World bank including OECD is enough to make the minister do the disclosure for those non public information But then even their debt department has some information from which you can read news on LT and others ad add up the numbers to sum and see the minister is being information efficient to effect positive transmission mechanisms in the Zambian economy

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  8. Ba Mutati is not that educated.Nipakanwafye.he is just an accountant who is clever in memorizing terms.he destroyed zesco.If u want to know go to zesco and see how he stole there.Mwanawasa never allowed him to be a minister of finince coz he knew him better.Only lungu who knows nothing can use such people.2021 lungu alebutuka.

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  9. SORRY, AM NOT DONE WITH THE ARTICLE. I WILL FINISH TOMORROW APART FROM THE LAST 3 WORDS WHICH SAYS THAT 2021 LUNGU ALEBUTUKA.AKABUTUKILA KWISA OKO TAKASANGWE? BUT HE HAS ALREADY STARTED UKUBUTUKA AS HE RUNS EVERY MORNING FOR THE SAKE OF EXERCISING. IF YOU DONT MIND, YOU CAN JOIN HIM UKUBUTUKA.WILL YOU?

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  10. Did you want Mutati to call the press and read what is already known word for word? It’s not everything that the chaps at IMF that is correct. In 1986 they advised KK to remove subsidies on mealie meal, they left KK to deal with ensuing riots alone. That’s how KK lost control and later power, but he warned us that Bakalume were clever thieves and today we have that can’t explain their wealth

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  11. Serious enteprenures and investors do very little talking and complaining.whenerver you hear people complain too much and critising a lot, then you know that they are failures.Mining and tourism investors are busy making millions of dollars and I have not heard them complain about IMF or government .just start your business and make cash instead of complaining. Silly arm chair critics chasing poverty .will find and suffer my friend .kikiki

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  12. Half-baked information, sorry, is provided by Under Five, the tribal party (UPND) and its cadres (check this blog) and a tribal online pressure group known as Galu Watchers in Zambia. The minister is too educated to be what you think. Are you from Namwala? I believe so!

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  13. Lying Stop lying you imbeciles. Felix Mutati like his elder brother Emmanuel Mutati are accomplished academicians. If you know anything about accountancy in ACCA level one through 4, CIMA, BA in accountancy not to mention ZIMA and other certificate or diploma accountance level, you cannot lie about Felix Mutati. They feed you with gabbage and you want attack the minister like he does not no nothing. First put your qualifications in accountancy so that we take you serious, especially if they are better that Felix Mutati’s.

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