By BUUMBA CHIMBULU
ZAMBIA is currently driving the conditions of the International Monetary Fund (IMF) agenda and this will lead to a more stable economy as being on the programme makes the macroeconomic outlook relatively brighter.
Zambia and the IMF on December 3, 2021 reached a Staff-Level Agreement for a three-year programme under the Extended Credit Facility for US$1.4 billion after agreeing on certain conditionality which has seen removal of fuel subsidies
These conditionalities are however not necessarily imposed by the IMF, clarifies Patrick Chileshe, Zanaco Head of Economic Research who instead explained that the IMF programme was driven by a country that was seeking help.
Government, Dr Chileshe said, working with the IMF came up with reforms needed to bring back the economy on a sustainable path while negotiating and agreeing on conditions such as how much fiscal deficit was needed.
“From an economic perspective, the IMF programme is driven by a country that is seeking help, it is at the point where a country realises it is very difficult for them to continue running the economy in an efficient manner and then they seek for help which is coming from the IMF.
“So in that case, the key drivers of the programme is not necessarily the IMF, it is the host country. That is why at a certain stage, a country has to write a letter of intent to seek help from the IMF,” he said during the Zanaco End of Year Economic Review.
Dr Chileshe stated that the IMF deal made the macroeconomic outlook relatively brighter than expected.
He said growth this year for example was expected to be around 3.8 percent, relatively better than what the Government was expecting of about 3.5 percent.
“We are relatively more optimistic especially after the agreed IMF deal, we expect it to create more stability in the economy to create more positivity among investors and that should drive economic growth amongst the private sector,” he said.
Zanaco Chief Risk Officer, Mutisunge Zulu, said 2022 would be a great year for Zambia as it would witness an influx of investors following the IMF deal.
Mr Zulu explained that getting on an IMF programme meant that commercial banks would lend more to the private sector.
He recalled that the banking industry was coming from a sovereign posture which determined how much they should lend and which sectors they should lent to.
“When your sovereign posture deteriorated, the banks tend to shy away from lending and participating to extending credit which eventually drives the wheels and engine for the nation
“So getting onto a package improves the outlook because there are a lot of players that have been sitting on the fence for a very long time,” Mr Zulu stated.
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