WHY ZAMBIA MUST ABANDON THE IMF DEAL
By Antonio Mourinho Mwanza
Zambia reached a staff-level agreement with the IMF on a $1.4 billion, three-year extended credit facility conditional upon its ability to reduce debt to levels the IMF deems sustainable.
KEY FACTS OF THE IMF DEAL
1. This is a loan and not a grant which we will have to pay back.
2. The money is NOT meant for economic development but balance of payment.
3. The money is to be given to Zambia in 7 instalments in the next 38 months upon Zambia meeting the IMF conditionalities for each review period.
We received the first instalment in September last year upon meeting the first set of the IMF conditionalities which included the removal of subsidies on fuel, electricity, removal of over 400,000 beneficiaries from FISP as well as the granting of hefty tax breaks to wealthy foreign multinational mining companies at the expense of our own local businesses.
Currently, Government is begging the IMF to access the second instalment of 188 million dollars but the IMF is dillydallying due to Government’s failure to reach a debt-restructuring agreement with lenders, the increased government corruption as evidenced in several shady deals which includes the fertiliser scandal, the 100 million dollar Ministry of Health scam, the single sourcing of major government contracts such as the 75 million dollar procurement of medicines and medical supplies from Egypt, the stinking Ndola-Lusaka dual carriageway scandal among numerous others as well as the lack of transparency and accountability at ZCCM-IH which has led to the suspension of ZCCM-IH from the London Stock Exchange by the Financial Conduct Authority.
The latest revelations by the FIC revealing suspicious financial transactions amounting to over 6.1 billion Kwacha and the latest Transparency International-Zambia Corruption Index have shown that corruption is getting worse.
4. The IMF has given Zambia very averse conditionalities that include stringent austerity measures and negative tax policies that have resulted into unbearable economic hardships and a turbulent future economic outlook for Zambia.
The IMF conditionalities include;
a) Removal of subsidies and tax incentives on strategic commodities and means of production including fuel, electricity and water.
b) Tax holidays and other tax incentives given to wealthy foreign mining conglomerates.
c) Reduced government expenditure on key social sectors such as education and health.
d) Privatisation (disguised as ‘restructuring’) of strategic state assets such as ZESCO.
e) Reduced government shareholding and state participation in the management of the mining sector which is chiefly run by foreign companies.
WHAT ARE THE OUTCOMES OF THE IMF CONDITIONALITIES ON ZAMBIA?
The IMF conditionalities have resulted in the following economic hardships for Zambia;
1. The astronomical increase of fuel prices from K17 per litre barely 8 months ago to the mammoth K24 per litre today.
2. High cost of living due to high cost of fuel, electricity, rentals, food, transport etc.
3. Huge losses of Government revenue as a result of reduced production and tax holidays given to foreign-owned conglomerates especially the mines.
The Bank of Zambia has just reported that Zambia’s revenue collection in the mining sector has dropped by an astonishing 40 plus %.
4. High cost of doing business due to high cost of materials and other variables such as transport, storage, electricity, water, taxes etc.
5. Reduced liquidity in the economy due to negative fiscal policies such as the increased Monetary Policy Rate (MPR) and Statutory Reserve Ratio (SRR) by the Bank of Zambia, making lending by commercial banks limited and expensive leading to tightened liquidity or simply put, lack of money in the economy.
There is no money in the economy. Almost everyone is broke or struggling to sell or buy goods and services. People are stressing to find money to pay for food, transport, medicals, school etc.
6. Escalating youth unemployment as a result of the clouding out of the private sector due to Government’s failure to pay huge outstanding arrears to contractors and suppliers; Government’s continued borrowing from the domestic market as well as the policy by Government of giving huge public contracts to foreign companies that are externalising profits and creating jobs in their countries of origin instead of creating jobs and business opportunities right here in Zambia.
6. Increased poverty levels and general economic malaise in the country.
Clearly, the IMF deal is taking us nowhere.
The IMF has failed to help us negotiate our debt repayment structure as promised and they are only interested in milking us of our resources through their bogus and destructive economic policies and conditionalities that will only worsen our economic situation.
It is time for Government to accept the fact that IMF is taking us nowhere and immediately discontinue/terminate the IMF deal.
WHAT IS THE WAY FORWARD
Zambia is losing over 7 billion dollars per year in tax breaks and illicit financial flows including tax avoidance, tax evasion as well as capital flight.
Why should Zambia, a country with copper, gold, sugilite, cobalt, manganese, mukula, rosewood, fresh waters, wildlife and precious minerals that are raking in billions of dollars for foreign investors be trotting to IMF to beg for a meagre 1.4 billion dollars which is coming with punitive conditionalities that are worsening poverty and destroying any chance of us to economically prosper?
Government can negotiate directly with our creditors without involving the IMF. Most importantly, Government can easily raise billions of dollars by simply closing the loopholes in our financial market, end tax breaks in the mines, invest in processing and manufacturing and increase our agricultural production.
Government must also pay all outstanding arrears to local suppliers and contractors; give tax incentives and major government contracts to our own local businesses to increase capacity, increase government revenue and create jobs for millions of young people.
This is the only way to make our private sector strive and help create jobs and end poverty.
Further, Government must stamp out corruption, increase transparency & accountability, and reduce the wasteful expenditure such as meaningless but costly presidential foreign trips that are benefiting Zambians nothing.