DEBT VS SHRINKING ECONOMIC GROWTH.
IS IMF THE SOLUTION ZAMBIA NEEDS?
Opinion By Kay Musonda 16/04/20
There’s been healthy discourse flowing for almost 48hrs now stemming from the “open letter to the president” written by former ministers who are economic and finance “experts” in this country. Various comrades have made submissions in favor or against the proposed measures among which is that government should approach the IMF and secure a bail out package before the end of this year.
From the back and forth exchanges I have picked out two things as follows;
1. We have a debt burden.
Whether this debt is sustainable or not has also been a matter of debate. Others argue that we re drowning in debt because 91% of the 2020 budget is going to emoluments and debt servicing. 50% on wages and 41% on debt servicing. Our external debt stands at $11.5bn an domestic debt at around $4.6bn.
Another school of thought says we are not in debt crisis because we have not defaulted on any loan and are able to service the debt.
2. We have a shrinking economy.
Economic growth rate forecast has been revised downwards from 3.2% to 2% for this fiscus.
Given the two scenarios above, what then is the solution?
Do we need an IMF package to secure balance of payments at this point?
Do we need an IMF package to stimulate economic growth?
The solutions are among us. Besides rebasing our economy or GDP to capture new economic sectors and activity that have come mainstream over the past decade, we need to open up new sustainable locally driven value chains.
Let’s legalize marijuana.
Let’s expedite gold mining.
Let’s open up pharmaceutical value chains. Let’s incentivize the SMEs and prioritize them over FDI.
Let’s develop the silk banks or village banking to a level where they can access funding from central bank on special terms.
Enhanced production and value added exports through new value chains will take away the headaches and remove IMF from our vocabulary.
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