||    7 December 2017 @ 11:33

I have received many enquiries from colleagues about what I make of the ‘breakdown’ in talks between the Government and the International Monetary Fund. My views are as follows: 1.Both parties, the Zambian Government and the IMF want the Program. On the part of the IMF, lending for balance of payments support is one of its three co-mandates. When Zambia requested for a program this year, the IMF expectedly went into motion, preparing ground for lending to one of its member states; in part to support economic stability and second, to contain spill-over effects. As things stand, Zambia is at high risk of debt distress and all efforts must be made to bring the risks down, moderate as the target. IMF responds professionally and aggressively to requests for lending for a three-year package that attracts the barest of interest rates (presumed to be below 1 percent). On the part of Government, the economic fundamentals have been very weak since 2015 and if not fully arrested, the country can slide back to what we just experienced despite a rebound in copper prices, an end to power outages (certainly at huge cost) and an end to election-induced spending. Both the Minister of Finance Felix Mutati and Bank of Zambia Governor Denny Kalyalya are aware of the potential risks and the best response is to build economic buffers the IMF route. Creditors to Zambia, particularly sovereign bondholders, are fully aware of this risk and that is the reason the ongoing talks are international news. Any indication of breakdown in talks has an immediate impact on the exchange rate. Just recently, the government securities were undersubscribed hence (in part) the scarcity in dollar supply.

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