The IMF lifeboat – well done Mr President

By Chimwemwe Mwanza

The tax base has been gravely eroded. Manufacturing, which for long has been Zambia’s economic locomotive – second to mining is virtually dead. That Zambia became the first nation to default on its debt repayment obligations in the Covid-19 era is emblematic of the country’s fiscal predicament.

In addition, existing economic policy framework is prohibitive to investment as exemplified by the previous dispensation’s seizure of mining conglomerate Konkola Copper Mines (KCM) from its owners, Vedanta. It is chiefly the reason global mining giants skipped Zambia to set up shop across the Luapula river. And impact of their investment is telling in the fact that the strife-torn Democratic Republic of Congo (DRC) is now the continent’s biggest copper producing nation by volume.

For example, in 2021, the DRC produced an estimated 1.8 million metric tonnes tons of Copper. To put this into context, this jaw-dropping figure represents a more than five-fold increase in the DRC’s copper production output since 2010. Compare this to Zambia’s paltry 880 thousand metric tonnes output for the 2021 trading period? This downward spiral to a sector contributing nearly 10% to the country’s GDP is the inevitable culmination of a long process of economic decline exacerbated by policy uncertainty.

Simply put: who would want to invest in an environment that can’t guarantee investment rights? Say what you may, it is a fact that economic fundamentals have transformed in recent months. In the eyes of the international corridors of capital, President Hakainde Hichilema is an upgrade and better suited to reign in on fiscal indiscipline than his predecessor. Barely a year into his reign, inflation has dipped below 10% for the first time in 3 years, prompting the Kwacha to rise as the world’s best performing currency. Needless to remind, these are facts.
While more needs to be done to boost momentum in economic growth, there is now a semblance of certainty in the business regulatory environment. Is it safe to bet that Zambia has indeed returned to the champions league of African economies? Good question. The absence of a correlation to a strong Kwacha weighted against the basket of rising food prices is a misnomer – it means nothing to a household in Bauleni or Kanyama that is battling to put food on the table. However, that investors are warming up to the country’s economic proposition is by far the biggest indicator of Zambia’s rising fortunes.

Economics simplified, what does the IMF deal mean for Zambia?

Let us be clear though, while not the responsibility of Journalists to tango in song and dance with governments, it is however important to acknowledge and celebrate key victories in so far as they pertain to economic and social development. Don’t be fooled, fact is the IMF’s decision to agreeing to restructure Zambia’s debt is a bigly to borrow, Donald Trump’s words – by the way, he is hardly our role model.
And the bigotry in the criticism levelled against this milestone is rooted in the fact that the PF tried but in vain to secure this same package – hence their criticism is nothing but duplicitous. Off course, the benefits of securing this package won’t trickle down to the grassroots anytime soon but this does lay a strong foundation for structural economic reforms. For example, Zambia’s huge foreign and domestic debt (combined) is estimated at K417bn.

Consider the fact that servicing this debt gobbles up to 70% of domestic revenues estimated at K99bn, this leaves the fiscus with almost nothing to inject into much needed economic and social development programs. While there is an obvious injection of liquidity into the economy, all that government has done is to request a moratorium on debt repayments – which has since been granted.

‘Tulelomba uluse nobwelelo kuli imwe ba shylock pali iyi kaloba twakongola. Pakubala, katuyi papansheko mumatumba lilya tulewayaya’ is the more literal interpretation mu chibemba of what this economic bailout entails. There isn’t any other way of spinning this development – kunyina, mudala, batamubeji. Against this background, the onus is upon this government to prove to its donors that the confidence and goodwill bestowed upon them won’t be misplaced through reckless spending.

Can our mining and manufacturing industries now begin to hum again please?

The author is an avid reader of political history and philosophy. He supports only Liverpool and Kabwe Warriors For feedback, contact [email protected]