The International Monetary Fund has refused to help Zambia before the August Presidential, Parliamentary and local government elections.
And the IMF says Zambia has been borrowing heavily but not using borrowed money wisely.
IMF Director of the African Department Antoinette Sayeh stated at a press briefing in Washington that Zambia has approached the IMF for a loan but that, the IMF can only prepare a progamm for Zambia after the elections.
She said ‘Zambia has also indicated to us that they would certainly be interested in discussing and pursuing an IMF supported program and we remain open to beginning those discussions. Of course, and we have in the context of these Spring Meetings had our usual discussions that we do with all country authorities including Zambia.
‘And we expect that those preparatory discussions will be a good underpinning for ultimately preparing a program that the Zambians would want to take forward, but we don’t see the full preparation of that program until the fourth quarter of this year, after the elections in Zambia..
Responding to questions, Sayer said the IMF is concerned about Zambia’s excessive borrowing
‘I hear your concern in that question and we certainly have our own concerns about borrowing and too much borrowing. Zambia of course borrowed on the issued sovereign bonds at high rates,’ she said. Sayer said that the proceeds of those bonds were used to finance some infrastructure, but also to cover the regular budget deficit including current expenditure and in light of the expense of that financing that was certainly not the best use of very expensive financing.’
The IMF advised Zambia to reduce its excessive borrowing and to quickly put in place measures to stop the financial indiscipline.
‘And our advice to the Zambians has been to really quickly work to put in place measures to reign in the huge fiscal deficit that is underpinning that borrowing and to adjust its spending pattern which is heavily driven also by current spending including the wage bill and to really work towards containing the deficit with a view to reducing its borrowing requirements. That is the only way to reduce the borrowing requirements – to contain the deficit and to make sure that the deficit that you may need to carry forward for development purposes are used to the best possible needs with high quality investments,’ the IMF official said. You can read the IMF statement here:
Just last week, the IMF said government finances in Zambia are under “immense stress” and the economy has contracted by around 3%.
Following a visit to the country, Tsidi Tsikata, head of the IMF team, said lower copper prices, electricity shortages and poor rainfall have exacerbated problems from rising inflation, mounting expenditure pressures and tightening financing conditions.
“Government finances are under immense stress,” he said. “Expenditure is running far above budget, in large part as a result of fuel subsidies and contracted emergency electricity imports that together are estimated to cost the treasury about $660m a year at the current pace (equivalent to 3.2% of gross domestic product).”
He noted that, at the same time, domestic and external financing options are becoming more limited along with rising interest rates. Domestic arrears are mounting, promoting concerns around debt sustainability in the southern African country.