Wednesday, 22 November, 2017
MINISTERIAL STATEMENT ON ENGAGEMENT WITH THE IMF – FELIX MUTATI, MP, MINISTER OF FINANCE
Mr Speaker, I thank you most sincerely for according me this opportunity to brief the House on where we are with respect to our discussions with the International Monetary Fund (IMF). This follows not only the point of order raised by the Honourable Member of Parliament from Chiengi Constituency, but also from the need for Government to keep the nation informed with respect to the discussions with the Fund.
Mr. Speaker, let me begin by putting our engagement with the IMF in perspective. In March, 2017, Cabinet approved that Government should engage the International Monetary Fund on a possible programme, under the Extended Credit Facility. The engagement was on the basis of the Economic Stabilisation and Growth Programme.
Mr. Speaker, the engagement was aimed at leveraging international support for attaining Government’s key objectives of restoring fiscal fitness, debt sustainability, addressing external sector vulnerabilities, job creation, sustained inclusive growth and development.
Mr. Speaker, this engagement does not mean that the IMF is here to bailout Zambia as Her Honour the Vice President rightly pointed out following the point of order by the Honourable Member of Parliament from Chiengi Constituency. We have as a nation defined the Economic Stabilisation and Growth Programme that is required to move the economy forward. IMF is being engaged to provide Balance of Payments (BoP) support as well as to provide an independent policy assessment.
Sir, significant progress has so far been made in undertaking policy and structural reforms under the ESGP, which the IMF has also acknowledged and commended Government. These reforms are in such areas as agriculture, energy and financial management.
Mr. Speaker, the major outstanding issues under discussions with the IMF are the need to take measures to slow down the pace of debt accumulation and return Zambia’s debt risk from high risk of debt distress to low risk and scaling up fiscal consolidation measures, particularly expenditure restraint. Both these aspects are part of our key reform measures and are clearly outlined in the Economic Stabilisation and Growth Strategy. What the IMF has asked is to have these measures accelerated.
Mr. Speaker, Cabinet on November 6, 2017 discussed these issues and gave a clear policy directive. These include:
- Developing a new financing profile that will ensure reduction in debt distress from high to moderate over the medium-term, and ensure that the debt remains sustainable thereafter;
- Re-prioritising projects by concentrating on ongoing before embarking on new ones;
- Re-scoping projects to be implemented in stages to ensure fiscal sustainability. An example is the implementation of the Lusaka – Ndola dual carriage way in stages as announced in the budget; and
- Hasten the implementation of revenue mobilisation measures such as automation, appointment of tax agents, and establishment of single windows at border posts, land titling and tolling.
Mr. Speaker, in addition, Cabinet resolved the following:
- Suspension of new non-concessional borrowing;
- No commercial contracts that require debt financing should be signed without Treasury Authority; and
- Tender and legal approvals should not be given where funds are not available.
Sir, our task as a nation is to ensure that we borrow within our capacity to pay and to refocus expenditures while enhancing domestic resource mobilisation. Of critical importance is to focus on completing ongoing projects before embarking on new ones. With these measures, Government has continued to engage the IMF. As part of the engagement, we recently had a visit by the Director of the African Department, the New Mission Chief and the Executive Director in charge of Zambia. During the visit, the mission met His Excellency the President Mr. Edgar Chagwa Lungu and Her Honour the Vice President Mrs. Inonge M. Wina.
Sir, as a member of the IMF, we must utilise a key mandate of the IMF of providing Balance of Payments Support to members experiencing balance of payments problems as has been the case for Zambia since 2015.
Mr. Speaker, in addition to the provision of Balance of Payments Support, the IMF is also a catalyst to access budget support and other flows from multilateral and bilateral cooperating partners. Furthermore, having a programme will enhance flows from private sector investors and reduce negative sentiments on the investment climate in the country. This is because many investors mainly rely on the IMF for the assessment of the country’s investment climate.
Mr. Speaker, let me assure the nation through this House that, Government is resolved to have an IMF-supported programme and the nation will be updated on a regular basis.