THE IMF DEAL

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PRESIDENT Edgar Chagwa Lungu with Vice
President Inonge Wina (centre) and Minister of Finance Felix
Mutati during the tea break of the Third Special Cabinet
Meeting at State House in Lusaka on Monday, October 17, 2016.
(Picture by Salim Henry/State House)

By Mwamba Peni II (PF CADRE)

The Minister responsible for Finance, Felix Mutati, has been
that fervent voice of assurance and predictability to the
market. However, he has always been putting his foot in his
mouth with regards to the IMF loan facility. To begin with, he
claimed that as opposed to post 1990’s when the Fund prescribed
conditions of engagement with member countries, Zambia was will
this time around actively shape the rules of engagement as an
equal partner. This is absolute false. You do not go to the
lender and determine the rules of engagement.

As if that is not enough, the Minister has had on two occasions
this year assured the nation that an agreement with the IMF
would be reached before the first quarter. Be that as it may,
Zambia has not yet laid the application for the program on the
table for consideration. My concern is that the more he
continues to make a cacophony of empty promises on the deal
when there is nothing yet, the more the market will keep
thinking may be there is something terribly wrong with our
economy that is causing the delay of the IMF deal.

Contrary to earlier assertions that our engagement with the
Fund this time around would be on equal footing, there are
certain conditionalities that we have to meet. In the face of
our public debt standing at USD 12.45 billion, which amounts to
47 percent of our GDP, fiscal deficit of 6.8 percent of our
GDP, 51 percent of our domestic revenue going towards the wage
bill for civil servants and 20 percent of our domestic revenue
going towards debt servicing, this is of great concern to the
Fund and surprisingly even to those who not long ago exhibited
huge appetite for borrowing.

One of the cardinal conditionality is to show in concrete terms
how we are going to deal with our deficit. Simply put, if we
say we are going to reduce the deficit by scaling down on our
expenses, we have to specifically mention projects that would
be stopped or whether we shall impose a wage and an employment
freeze in the public sector and show how much money we expect
to save from that. If on the other hand our target is to
increase our revenue collection, we have to specify what new
tax measures we are going to come up with and how much money we
expect to raise from that.

On the contrary, Government recently announced salary increment
for civil servants as well as a projected recruitment of about
2,000 employees in one sector. Furthermore, 30 percent of our
budget will be financed by both domestic and local debt. With
the wage bill currently standing at 51 percent of domestic
revenue, public debt at 47 percent of our GDP and fiscal
deficit at 6.8 percent of our GDP, it is unlikely that we would
be seen as a people committed to dealing with both our debt and
deficit in a sustainable way when our next year’s budget has no
practical solutions therein on how to come out of this
precarious situation.

If our suggestion is to deal with the deficit through more
revenue collection, projected domestic revenues, which amounts
to 67 percent of the budget, can only help us pay for civil
servants and service loans. Consequently, if we have failed to
demonstrate how we are going to deal with both the deficit and
debt in our national budget which is only the legal and
official guide for managing our resources, how will a separate
piece of paper that we are going to submit help us clarify
certain matters that are required before we are recommended to
be put on the program? How will the IMF Mission Team risk their
careers by recommending to the Board of Directors that we be
considered to be on the program when our words do not match our
actions?

In the final analysis, Mutati has been playing lip service as
there is no real commitment in next year’s budget to what he
has been preaching. The much talked about “Zambia Plus”
program, whose foundation was based on Mutati’s claims that “we
cannot spend what we do not have, we cannot borrow beyond our
ability to repay,” when 30 percent of our budget next year is
going to be financed by debt while our overall debt is
equivalent to 47 percent of your GDP is nothing but mere
political rhetoric. And there is no way the IMF deal can go
through when we have failed to demonstrate how we intend to
deal with our deficit in a clear way unless indeed Mutati has
acquired special abilities to impose his conditions on the IMF.

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