President Edgar Lungu left the IMF mission team that recently visited Zambia frustrated after he refused to agree to terms of their proposed financing facility for Zambia.
Highly placed sources at the Ministry of Finance have revealed that the IMF team that left Zambia on Friday were ready to offer close to US$1 billion extended facility to help stabilise the Zambian economy.
One of the key conditions to accessing the facility however was that President Lungu announces a range of austerity measures to help with fiscal consolidation.
The IMF team led by Mr Tsidi Tsikata demanded that the PF Government cuts fuel subsidies.
The sources also revealed that the IMF further demanded that Government realigns its expenditure on ongoing road and other infrastructure programmes.
They said President Lungu told the IMF team that he is reluctant to withdrawal fuel subsidies fearing that it would result in a spike in fuel prices which could cost him the next election.
The sources also revealed that President Lungu felt that slowing down on the road projects would be a sign of failure which could spell doom for his administration.
The treasury sources said Finance Minister Alexander Chikwanda was more receptive to the IMF package but was left frustrated by President Lungu’ refusal to entertain the IMF proposals.
‘What this means is that we are going to experience a very difficult period going forward. We were optimistic that we would strike a deal with the IMF to ease the pain but it appears our leaders are not reading the signs of the times,’ one source said.
‘What we were proposing is similar to what was agreed with Ghana last month and we were able to provide $918 million to the authorities and you can now see some stability with the Cedi. This has however come about because the Ghanaian government agreed to withdraw subsidies on fuel.’
And a member of the IMF team that visited the country also confirmed that there was nothing concrete that emerged from the mission visit because the Zambian Government was resistant.
‘There seems to be deep-seated misgivings about the IMF which we feel is unwarranted because as much as the Fund has had bad history in this country, it has undergone serious reforms over the years and we thought Zambia, having invited us over here would be more willing to consider our proposals but that has not been the case,’ the source whose identity has been withheld said.
‘Our team was left wondering whether this man (President Lungu) really wants to win the next election. We were of the view that the aid package we were proposing would provide the much needed fiscal relief in the short to medium term and help stabilise the economy,’ the source said.
‘What we were proposing is similar to what was agreed with Ghana last month and we were able to provide $918 million to the authorities and you can now see some stability with the Cedi. This has however come about because the Ghanaian government agreed to withdraw subsidies on fuel.’
But Secretary to the Treasury Fredson Yamba in a brief statement said the Zambian Government recognizes that risks remain and mainly relate to the need to contain fiscal pressures, particularly those related to the costs of electricity imports and the attainment of cost reflective fuel pricing, following the steep deprecation of the Kwacha.
Mr Yamba also confirmed that increased spending on subsidies partly due to the depreciation of the Kwacha also poses risks to the treasury including the need to complete ongoing infrastructure projects.
‘Government will ensure that it re-aligns expenditures to counter some of the pressures. It will also limit its borrowing in the domestic market and will also regularly review budget implementation with the objective of taking other corrective policy actions. The Zambian Government will undertake consultations to define the forms of further engagement with the Fund.’
Source: www.lusakatimes.com
