By Chibamba Kanyama
1. My first contact upon returning from IMF in 2017 was Felix Mutati, Finance Minister. We discussed strategies on engaging stakeholders on the planned IMF programme, including his Cabinet colleagues apprehensive about the Program. ‘Assure them you have already embarked on tough measures such as removal of subsidies ahead of the programme,’ I shared with him, fully aware he did not have consensus on the subject.
2. Subsequent meetings centred on implications to the economy if he was removed as Minister. International counterparties saw him as only mover of the IMF programme. I offered to meet the Head of State so that I could personally share with the President how to handle and manage the Minister of Finance during IMF programme discussions and when the programme kicked in. Did not have the opportunity.
3. The issue of China also came in; as the best option to Zambia’s budget support and balance of payments. The view was China would never support the budget let alone balance of payments support. The other strong feeling was that it would be suicidal to the economy to engage China when negotiations with the IMF were ongoing.
4. Mr. Mutati is now out of the Ministry of Finance; this happening when the IMF discussions are reaching a dead end owing to debt sustainability problems. However, according to international assessments, the economy taking shape: economic growth at a reasonable level of 3.3 percent year on year; inflation around 6.2 percent, government hit its targets for the 2017 budget, the deficit at around 6.8% of GDP better than projected (7.5%), the debt position as a ratio of GDP reduced from 60 to 56 percent; the Zambian Revenue Authority beating the target by over K1 billion as we closed the year, and Moody giving a stable rating early in 2018.
5. Mutati also credited for introducing debt acquisition reforms that would see parliament in 2018 decide on debt contraction procedures.
6. International watchers on the Zambian economy shared apprehensions early this year of what would happen if Mutati was fired. They concluded, ‘That would imply a complete takeover of the current process and an erosion of economic institutions.’
7. The promotion of Margaret Mwanakatwe as Finance Minister has not gone well with many economic watchers, analysts and advisors on Zambia. Following my interview with Bloomberg where I indicated some level of optimism, I was swamped with international calls. Two of the fund management advisors made it very to me, ‘Chibamba, you seem to be the only one optimistic about the appointment of Mwanakatwe. We don’t know her, and she is little known despite having worked for a global institution and served as Minister of Commerce’.
8. Despite my numerous concerns such as the new path to restructure Chinese debt which I think Mwanakatwe will be driving, and the motivation for her appointment (possibly as a friendly party in government’s desire to support spending ministries), and the outstanding petition, I am still optimistic she will succeed purely on the back of my two assumptions:
• She is much more accepted in the Cabinet ranks than Mutati was. It means objections to fiscal compromises will be taken in good context. In other words, she has more authority within the ranks to say ‘no’ to unplanned spending than her predecessor had.
• She is an accountant and a banker who is expected to apply maximum due diligence and ethical leadership in the execution of her duties. Being a banker provides her the best leverage to negotiate financial deals with expected acumen. She should, however, work extremely hard to restore the decline in confidence following the removal of Mutati as Finance Minister. The court case about her election and uncertainty around it will play large among investors, and some are already unsettled.
If she can bring the IMF back to the table, which is very unlikely as things stand, international investors will rate her highly. It is more a question of whether she has the appetite for an IMF program than what the IMF has just said about the unsustainability of Zambia’s debts. For me, a firm decision about the IMF programme must be made in the next few days so that we end all speculations around it as this is damaging the credit rating of the country.