IMF Conditions of Concern
The Conditions have been drawn from the IMF statement released to announce the facility.
● Secure timely restructuring agreements with external creditors.
My Comment; First we didn’t need the IMF to resolve our debt crisis and we didnt need another loan to attend to our current loan portfolio. Now that it is involved and has helped set up the Creditors’ Committee, this should not be a condition for the $1.3billion Extended Credit Facility to be disbursed or succeed.
● ECF to support Homegrown Reform Plan.
My Comment; This is speaking in forked tongue as the IMF would not have provided preconditionalities if it was supporting a home-grown programme.
●Eliminate fuel subsidies.
My Comment; Currently the subsidies are two fold
1. Indirect subsidies- taxes upto 41%( Customs Duty 25%, VAT 16% & Excise Duty) on petroleum products remain suspended.
My Comment; Reinstating these taxes immediately will make the pump price of fuel shoot up to dangerous and unsustainable levels that may threaten social stability.
2. Uniform Pricing- Government meets direct subsidies to ensure that the pump price is the same across the country.
My Comment; Removing this subsidy will drive the pump price in rural areas to expensive and unaffordable margins.
● Agriculture Susbsidy program- Ministry of Finance announced earlier that it will reduce support to the FISP Programme (now called Comprehensive Agriculture Support Programme) from 2.8% of GDP to 1%. The IMF has called for efficiency to the agriculture susbsidy program.
My Comment; This will clearly adversely affect the current one million small-holder beneficiaries.
●Domestic Revenue Mobilization to support medium-term adjustments.
My Comment; The IMF has requested government to increase taxes and collect those its not collecting such as taxes on fuel. Brace for hard times.
● Deep and Comprehensive Debt Treatment to place public debt on a sustainable path.
My Comment; there is no debt forgiveness as a priority. Probably there will be debt reschedule and debt restructure but little or no debt forgiveness. We are deferring the problem to a future date.
● Change of Procurement Practices-
My Comment- Zambia has conducted extensive procurement reforms since 2008. Just recently another far-reaching Procurement Act was passed in 2020. It is clear that regulatory reforms and the law alone will not dismantle the cartel among business, politicians and civil servants that routinely pillage the Treasury through over-pricing…but we have to keep on pushing for the security and prudent use of public resources.
● Replenish International Reserves and allow conditions on the exchange rate to reflect market conditions.
My Comment; This is a welcome move. But it shows that the Central Bank maybe manipulating status of the exchange rate and IMF is urging Bank of Zambia to allow it to be driven by market forces and conditions.
●Conclusion
We must brace for very hard times especially when fuel subsidies are removed, which may have spiral effect on other essential commodities.