IMF alone cannot dismiss Zambia’s borrowing – ZIPAR

Mon, 26 Feb 2018 09:55:26 +0000

By BUUMBA CHIMBULU

 REPORTS suggesting that the International Monetary Fund (IMF) has dismissed Zambian’s borrowing plan while putting loans on hold is misleading as the Fund can only decline to join the party and not terminate, explains the Zambia Institute of Policy Analysis and Research (ZIPAR).

ZIPAR senior research fellow, Caesar Cheelo, said Zambia’s borrowing plan was not for the IMF alone, making it impossible for the Fund alone to individually dismiss it.

The think tank indicated that as long as Zambia remained a member of the IMF, it still had chance to access the US$1.3 billion package.

Mr. Cheelo explained that the IMF did not have the jurisdiction to dictate to any country how it should borrow but could offer advice which the State could listen to or not.

“The fact is, the IMF did not dismiss anything! It simply declined to extend a loan to Zambia because Zambia’s current plan to keep borrowing from other (domestic and external) sources – in addition to the would-be IMF loan – exposes the country to high risk of debt distress,

“The IMF can decline to support Zambia’s borrowing plan, but it cannot dismiss it. The only thing the IMF can do is refuse to put its own money as a loan on the table if it feels, as an investor, that the investment is too risky given the environment. This is what has happened in the case of Zambia.” he said.

Responding to a press query, Mr. Cheelo explained that the second loan application to the IMF for US$1.3 billion had been declined because the borrowing plan attached to it was still not good enough thereby exposing Zambia to high risks of overall debt distress.

Meanwhile, Mr. Cheelo said Zambia still had a chance to access the US$1.3 billion package because it was still a member of the fund. He, however, said Zambia would only access the package if it chose to slow down on its heavy spending and thus reducing its appetite to borrow.

“The IMF will keep rejecting the Zambian proposals for as long as the planned borrowing is overly ambitious and continues to pose a threat to debt sustainability,

“And these borrowing plans are really underpinned by heavy and unrelenting public expenditure ambitions.

The government is refusing to slow down its spending on economic and social infrastructure and administrative infrastructure,

“So the message here is that Zambia will only access an IMF package if it chooses to slow down on its heavy spending and thus reducing its appetite to borrow,” Mr. Cheelo said.