Lusaka - Zambia should access emergency funding from the International Monetary Fund to prevent further deterioration in the economy, according to Situmbeko Musokotwane, a former finance minister in Africa’s second-largest copper-producing country.
A team from the Washington-based lender visited Zambia this month at the invitation of the government to assess the state of the economy and discuss responses to the fiscal issues facing the country. Neither the government nor the IMF mentioned the possibility of talks about an economic programme in their statements at the end of the tour on November 20.
“Zambia is quickly running out of money,” Musokotwane said in an email on Tuesday. “It is incumbent upon the government to agree with the IMF on a programme that not only stabilises the economy, but also quickly restores investor confidence and rekindles faster economic growth as it was before.”
The southern African nation has been hit by copper prices that have fallen to six-year lows just as a power crisis hobbles production. Government overspending is also hurting the economy, the IMF said in its end-of-visit statement. The kwacha has lost 45 percent of its value against the dollar this year and the local unit of Glencore is among mining companies cutting output and retrenching thousands of workers.
Considering options
Zambia is resisting an IMF deal to avoid the strict conditions that will accompany it, said Musokotwane, who was finance minister from 2008 to 2011. President Edgar Lungu’s government doesn’t want to cut spending before general elections next year, he said.
The government isn’t against an aid program from the lender, Deputy Finance Minister Christopher Mvunga said by mobile phone on Wednesday.
“Government is looking at different options,” he said. “We’re not averse to an IMF package. We’ve put our own measures in place place, so let’s see how these measures work out, if we’re able to correct the issues that are around. We’ll look at any possible means that are best for the country.”
Irmgard Erasmus, an analyst at NKC African Economics in Paarl, near Cape Town, agreed with Musokotwane that the government should get financial help from the fund.
“Zambia needs to urgently agree to a rescue package with the IMF to meet borrowing requirements and re-establish investor confidence,” she said in an emailed note to clients on Tuesday.
BLOOMBERG