By Chibamba Kanyama
1. This has been a highly anticipated statement by Eurobond holders. They have been glued to the IMF website in past few months to know the position of the IMF on Zambia’s economy.
2. IMF Board statements go through extensive reviews within the Fund. The meeting on Zambia took 30 minutes as per standard but much of the work was done weeks before the Board Meeting. What we are now reading is the Fund position on Zambia, expressing deep concern on public debt- which, according to the Fund, is a key driver to the deterioration of the economy; putting us in danger of debt distress.
3. What the IMF Board has assessed is not new to Zambia, not even to the Government. Those fears have recently been expressed by government itself, leading to ‘re-announcement of austerity measures in June.’ What is new is that the concerns are coming from the IMF Board.
4. The position of the IMF Board has implications on the performance of the Eurobond and capacity of Zambia to refinance the external debts. Investors were expecting a bit more optimism from the global monetary watcher and financier. The reading of the situation by investors is that Zambia may default on debt and this is their takeaway from the IMF Board statement. They know IMF always cultures public statements in a manner they do not negatively affect investor perceptions of the given economy.
5. However, the position of the IMF Board is not about hopelessness. It has very clearly guided Government on actions to take to reverse the deteriorating economic fortunes and this is summed up in one sentence, ‘Directors welcomed the Cabinet decision in late May to indefinitely postpone the contracting of all new non concessional loans, cancel some committed but undisbursed loans and enhance the control and management of disbursements of foreign financed loans, and to strictly adhere to public financial management rules under the 2018 PFM Act.’
6. What I strongly read from the IMF Board position is that IMF is ready to help Zambia. Where else would Zambia get reasonable concessional loans away from the Fund itself? This message is carefully nuanced in the statement and government observes the hidden but clear invitation.
7. What this means is that Finance Minister Bwalya Ng’andu should pick up the phone and call the Mission Chief for Zambia to do two things. First, ask her to send a replacement to Alfredo Baldini, IMF Resident Representative, who was recalled in July 2018. This person is the Ambassador whom government can start discussions with, particularly to guide government on how to clean up and harvest data that facilitates for smooth programme discussions. Second, the Minister should agree with the Mission Chief on a clear programme roadmap, more so that we are heading for general elections in two years’ time. This event has implications on programme negotiations. The earlier it is done the better and I want to assure Government that an IMF programme will actually do more good to economic stability and public support than harm.
8. I also remain optimistic that the new Finance Minister will have international goodwill if he studies this document, frankly shares it to Cabinet and then come up with clear actions in response.
9. I wish Zambia well.