UPDATE ON ENGAGEMENT WITH THE IMF

Zambia has made substantial progress towards reaching an agreement with the International Monetary Fund (IMF) on an economic programme.

The Government remains confident that the IMF will in a few weeks finalise a report on the Article IV Consultations done in June 2017 - for presentation by the staff to the IMF Board.

Since Cabinet’s approval at the end of the first quarter of 2017, for Zambia to engage the IMF on an economic programme, the Government and the IMF have been engaged in discussions on the details of what would constitute the programme.

In June, 2017, the IMF sent a staff mission to Zambia. Detailed discussions between Zambian Authorities and the IMF were held, with a view to exchange information, and reach consensus on a number of key policies and structural reforms required to enshrine economic stabilization, restore growth, and ensure employment creation going forward.

The programme discussions have so far taken into account the progress which has been achieved under the Zambian Cabinet approved Economic Stabilisation and Growth Programme (ESGP) for the period 2017-2019.

The progress achieved to date, includes:

  1. Attainment of sustained single digit inflation;
  2. Stability in the exchange rate;
  3. Rebound of GDP growth;
  4. Reforming and removal of subsides in the energy sector, particularly for fuel and electricity;
  5. Reforming the Farmer Input Support Programme (FISP) by fully migrating to the e-Voucher input system and rationalising the number of beneficiaries;
  6. Development of a strategy for dismantling arrears and halting accumulation of new ones. The commencement of dismantling of arrears which are projected to reduce to around K12.0 billion at year end from K17.6 billion as at end 2016;
  7. Reforms to anchor fiscal implementation in law, key among them the Loans and Guarantees (Authorisation), Planning and Budgeting, Procurement, Bank of Zambia Bill, and Deposit Protection Bill;
  8. Situational Analysis and subsequent technical and operational studies for key SOE's, namely Zesco; Zamtel; Tazama Pipeline; Indeni; Zambia Railways; and, Zambia State Insurance Corporation. The studies will inform policy options for each of the SOE's, aimed at reliving pressure on the Treasury.

Based on the ESGP targets that Government has been implementing, the Fund and the Government have thus far agreed on policies and structural reforms over the medium-term for a prospective programme.

Part of the issues concluded include; protection of social spending over the programme period; reform of laws and regulations; and, definitions and measurement of programme targets.

Against this progress, the IMF and the Zambian Government have agreed to progress discussions in the area of public sector spending and borrowing plans.

These plans will inform the fiscal path and macro framework over the medium term, which are to be mirrored in the 2018 Budget and Medium-Term Expenditure Framework (MTEF), 2018-2020.

Going forward, the Government has agreed with the IMF to continue discussions at the IMF/World Bank Annual Meetings to be held in Washington DC in October 2017.

Meanwhile, the IMF is in the process of finalising the report on Article IV Consultations done in June 2017, for presentation to the Board.

Felix C. Mutati, MP
MINISTER OF FINANCE

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