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Statement by the Secretary to the Treasury, Mr Fredson Yamba, at the end of an IMF Mission to Zambia on Friday 24 March, 2017
Ladies and gentlemen - as you may be aware, an IMF team has been in the country since 9th March, 2017 for discussions with not only government authorities but also Members of Parliament, trade unions, civil society, the private sector and business community and indeed our cooperating partners.
The discussions included interactions under Article IV. The discussions also focused on an economic programme with the IMF. Following these discussions the Ministry of Finance is going to table before Cabinet the outcomes of the Mission.
Ladies and gentlemen, such a wide spectrum of interactions is an indication of the importance that the government attaches to transparency and consensus building in defining how we must manage our economy. In times of economic headwinds, collective wisdom is vital in coming up with measures to address these challenges.
This kind of engagement also provides a much fuller and complete picture through which the Fund can make an independent assessment of how the economy is performing and make appropriate recommendations to the Government.
I wish to thank the team from the Fund, led by the mission chief Mr. Tsidi Tsikata, for the cordial and frank manner in which they held discussions with the diverse stakeholders. It is important that we look at the challenges that we face squarely and honestly, and this is only possible if we hold discussions in an honest manner as we have done during this mission.
Ladies and gentlemen - over the past two weeks, we have held discussions on recent socio-economic developments in the country. On the part of the Government, we highlighted the recent economic developments with focus on challenges and possible remedial measures.
We have also highlighted that fiscal performance has been the major challenge, with government expenditure being higher than the budget over the past few years.
We have outlined the major expenditure pressures as emanating from public infrastructure spending, agriculture, electricity and fuel subsidies, unexpected importation of electricity and higher interest payments on debt. Another major source of concern has been higher growth in total public debt.
Ladies and gentlemen - during our discussion we have indicated that Government has developed appropriate policy and structural reforms needed to restore macroeconomic stability which is critical for sustained higher and inclusive growth.
Let me highlight some of the key messages in the programme:
- Government intends to reduce the overall budget deficit so as to create space for private sector borrowing;
- Reduce deficit to enable re-balancing of fiscal and monetary policy;
- Phased clearance of arrears largely related to infrastructure development and energy, while curbing accumulation of new arrears;
- Removal of subsidies in a phased manner;
- Slowing accumulation of debt;
- Increasing social sector spending to address poverty issues; and,
- Enhancing growth prospects.
Ladies and gentlemen - notwithstanding the challenges alluded to, on the positive side, 2017 shows evidence of recovery reflected in the higher projected growth of 3.5 percent from 3.0 percent in 2016 and 2.9 percent in 2015. Further inflation has been on a downward trend falling to 6.8 percent in February, 2017 from a high of 22.9 percent in February, 2016. The liquidity conditions have also eased following Bank of Zambia’s recent monetary measures while the exchange rate has maintained relative stability. Government expects that credit conditions should improve going forward while the growth momentum and other positive developments are expected to be sustained in 2017 and medium term.
Ladies and gentlemen - the Government and the IMF Mission are in general agreement with the policies and structural reforms outlined in the economic stabilisation and growth programme.
As we continue engaging the Fund, my appeal to the Zambian people is to remember that the measures that must be taken are necessary for improvement of our livelihood. We cannot continue to borrow at current levels; to accrue arrears to our contractors without hurting their businesses; and provide subsidise. Government officers, especially Controlling Officers are directed to play their part in curbing government excesses.
Ladies and gentlemen - as I conclude, let me reiterate the commitment of the Government to work with all stakeholders, including the IMF, in coming up with practical and pragmatic solutions to the challenges we face.