The Zambian Government and the International Monetary Fund (IMF) have agreed on a number of areas that require an immediate policy response, especially with respect to frontloading of fiscal adjustment.
The Ministry of Finance says other areas include reducing debt accumulation, addressing the challenge of domestic arrears, and enhancing external buffers.
The Ministry of Finance and other Government Ministries, Parliament, Cooperating Partners, the private sector and other stakeholders held consultations with an IMF mission from 16th to 30th April, 2019.
This is in line with Article IV of the governing laws of the IMF that require member countries to interact regularly with the Fund for surveillance programmes.
Finance Minister Margaret Mwanakatwe says the two parties also agreed that there is need to protect expenditure towards the social sectors.
Mrs. Mwanakatwe says it is government’s shared vision that accelerating implementation of such reforms is the surest way to re-energize the efforts aimed at improving the livelihoods of the Zambian people.
“During the meetings, Government provided all the necessary data required for the assessment, a process that culminated in the Government and the IMF reaching agreement on data accuracy,” she said.
“The fiscal deficit at 7.5 percent of GDP for 2018, the external debt stock at US $10.05 billion, the domestic debt at K58 billion, guarantees at US $1.2 billion, and domestic arrears at K15.6 billion, formed a large part of the data shared and discussed with the IMF. The total debt as a percentage of GDP for 2018 was therefore 73 percent.”
The Finance Minister said Government takes note of the projected slowdown in growth for 2019, at the back of the drought experienced in some parts of the country during the past agricultural season, and the higher projected inflation.
Mrs. Mwanakatwe stated that the Government will therefore, put in place measures to redress the impact of the drought on growth.
“The Bank of Zambia through use of various monetary policy instruments is also geared to ensure that inflation is maintained within the set band of 6-8 percent. Measures to keep the deficit within the 2019 budget target, as well as the medium term, will be undertaken as part of the adjustment measures agreed with the IMF. In this regard, control measures around debt accumulation and halting arrears build up will be implemented expeditiously,” said Mrs. Mwanakatwe.
“All these measures will ensure a quick return to a path of sustainable growth, fiscal consolidation, debt sustainability and build-up of external reserves. To ensure that the top leadership is on board with the measures discussed and agreed with the IMF, I will be taking the measures to Cabinet for consideration and endorsement.”
She indicated that the Government is aware of the challenges facing the Zambian economy.
She said this is a key first step towards undertaking corrective measures.
The International Monetary Fund (IMF) staff team was led by Mary Goodman.
The team will prepare a report of the Article IV Consultation which will be discussed by the IMF’s Executive Board in the coming months.