IMF urges Zambia to take urgent steps to save economy

By Francis Maingaila

LUSAKA, Zambia (AA) - The International Monetary Fund (IMF) has proposed urgent measures, including cuts in social spending to clear arrears to save the current economic situation in Zambia.

Speaking at a press conference, chief of IMF's observation mission in Zambia, Tsidi Tsikata, said the pace of economic activities in the country had remained sluggish in 2016, with economic growth projected at less than 3 percent.

According to the IMF, the country’s economy was under pressure from a combination of external and domestic shocks, including an unbalanced policy mix.

Tsikata said electricity shortages, a decline in exports and strained public finances had subdued private sector consumption and investments, putting the private sector and the banking industry under great stress. He added that tightening of monetary policies had also slowed economic growth.

“This has led to an increase in stock of arrears from 5 percent of GDP [Gross Domestic Product] in 2015 to slightly over 10 percent of GDP in 2016,” he said.

“The fiscal performance through the first quarter of 2016 was characterized by shortfalls in revenue and substantial overspending on the part of government. To a larger extent, this had adverse effect on the general economic outlook,” he added.

Tsikata said there was no bailout package for the Zambia government yet.

“Our mission in Zambia was only to make an assessment and make recommendations on how best the economy can be given a new life. The bailout package will be agreed later,” he said.

Finance Minister Felix Mutati said the government had invited the IMF next year for further consultation on how to resolve the economic woes of the country.