Thu, 23 Feb 2017 11:19:33 +0000
By BUUMBA CHIMBULU
THE International Monetary Fund (IMF) supported programme will result in stable macroeconomic fundamentals as Government will significantly reduce unplanned expenditure, says economist Lubinda Habazoka.
In an interview with the Daily Nation, Dr. Habazoka said one of the advantages for the IMF package was that governments were forced to control its expenditure.
“After getting the IMF package, Government will significantly reduce unplanned for expenditure and overspending.
“This will result in stable macroeconomic fundamentals for the country like what we witnessed when the country followed a strict Highly Indebted Poor Countries (HIPC) programme in 2000,” he said.
Dr. Habazoka said the advantage of an IMF package was that Zambia would have a multilateral institution to whom Government would be answerable for their fiscal policy.
He further said there was need for wider consultation before Government decided on acquiring loans from the IMF.
Dr. Habazoka, however, said the disadvantage of the IMF program was that it would increase Government debt.
“Debt that will come with conditions such that government cannot channel resources to areas where they think are vital.
“IMF packages unfortunately can come with conditions like increase in income taxes for businesses and households, a move that will choke the already overtaxed market participants,” he said.
Dr. Habazoka noted that the IMF never imposed itself on countries, but might come in to help to ensure stable exchange rates – a function embedded in it upon its creation.
“An IMF package would also mean job cuts in the public sector, privatisation of public enterprise and other measures that might be wise but unpopular with the population,” he said.
