The International Monetary Fund (IMF) Executive Directors have welcomed the recent improvement in Zambia’s economic outlook and have urged the authorities to take advantage of the current favorable conditions and implement decisive and prudent macroeconomic policies and reforms in order for them to place public finances and debt on a sustainable path, build international reserves, increase the economy’s resilience to shocks, and achieve higher and inclusive growth.
This is according to the 2017 IMF Article IV consultation with Zambia which was concluded on 6th October, 2017 where the directors also welcomed the launch of the Economic Stabilization and Growth Program and the Seventh National Development Plan, while noting that domestic and exogenous risks pose significant challenges.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
They commended the Zambian authorities for taking strong measures to phase-out regressive fuel and electricity subsidies, as well as the scale-up on social protection programs.
The directors noted that achieving the government’s fiscal consolidation goals will require stronger efforts to increase domestic revenues, including addressing widespread exemptions and broadening the VAT and income tax bases.
Emphasis was made on the importance of containing recurrent spending, improving commitment controls, phasing out subsidies, and strengthening public financial management.
They expressed concern at the pace at which public debt, especially external debt, has increased and now put Zambia at high risk of debt distress, however they commended the progress made in developing a medium-term debt strategy.
While recognizing the need to address infrastructure gaps, they emphasized that to maintain debt sustainability, it is critical to slow down on the contraction of new debt, especially non-concessional loans, strengthen debt management capacity, and improve project appraisal and selection processes.
And Mr Mutati said Article IV was an indication that Zambia was heading in a correct direction. This is the first to be issued since 2015.