Why few holding SOME brakes on IMF support?
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By Kelvin Chisanga, Zambian Economist and Communications Specialist
+260 97 9305194
The economy is at stake, the IMF is coming in as a cooling agent to two important things here, one to neutralize the effect that we are currently faced with, especially the pressure to make repayments, secondly, to make and help us foster in leveraging on the economic growth and we need domestic growth to liberate economic wheels, otherwise we will be heading to collapsing of the economy, simply because the current happenings can’t take us anywhere.
Am very much aware of the impact that we faced previous in our early stages of privatization process of 1990s but believe it, the IMF of yesteryears and today are quite different, as said before the problem we have is bigger than the projected consequences of supposedly assumption of critics, as this might be a short term measure to factor economic growth which has been a blind aspect with many critics and we can also attested to the declining levels of growth from GDP growth rates of 6 to 7% few years ago.
Finance Minister Dr. Situmbeko Musokotwane meets IMF in Lusaka on Tuesday 31st August, 2021
Its more less like you are building your own house with very limited resources then you have two options to quicken the process either you go through a shylock who should collateralized your property at higher interest like in the case of the Eurobonds and Chinese non-concessional loans through projects (which Zambia recently went for), within the last 10 years where you are now currently required to pay back and you are even falling to meet up with the obligations of repayments on time, for your own information Zambia defaulted almost three times or perhaps you go along with a normal commercial bank with terms to help you breath like what the IMF is simply doing so, and advantages of longer term repayments at lower interests compared to both Chinese and Eurobonds.
Zambia has toxic debts which have LITERALLY choked economic growth, as it is even impacting negatively on our balance of payments (International Reserves) having a poor reserve base for almost five years down the line, effects of low reserves impacts strongly on inflation and Forex market performances though we seriously need to build export power to counterbalance this trend though it can only be done when things are set right.
Bank of Zambia Governor Dr Denny Kalyalya on child financial literacy
It is however, surprisingly to see that the same IMF some people are now condemning has given them (Zambia) with a USD 1.3 Billion Special Rights Drawing to buffer on their reserve support on mainly to bring in, an aspect of scales of balance for commerce and trade, on top of that they are telling us Zambians if successful with the IMF talks, will repay all their loans on concessional terms with a tenure of at least 30 years as opposed to Eurobonds which are now maturing in 2022, 2024 and 2027 plus with interest repayments of 600 million USD in defaults- these were contracted within 10 years of PF together with Chinese loans which are in road and airport infrastructures, and are required to be paid.
On the other hand, IMF is coming to help with renegotiations on the other creditors like Eurobond holders and Chinese to give us some breathing space as we make these repayments orderly, so the IMF involvement is not adding up any loans to our debt portfolio as what we are doing is simply getting a loan in and paying that same loan out, for a better conditions so that we can have a shift of loan conditions to a more breathing capacity area which can steer and spur economic development even at a slow pace.
The IMF support is in the country, and today 04th November, they discussing on ways to help in cushioning of this pressure with talks for possible debt negotiations restructuring with the creditors as they also do offer some technical support in this area. The reasons as to why some few would be holding on brakes is basically the issue of social support which with this pandemic-era economy, I don’t think the IMF can go this way when they fully know that social protection is equally paramount for a productive society. In economies social welfare is very important aspect of building strong and robust economic foundations.
