Zambia’s strained economic situation was not enough for Africa’s largest copper producer to be enticed by the International Monetary Fund (IMF) olive branch. Zambia’s President Lungu turned down the IMF’s aid package, largely because of conditions tied to it.
At the end of a 10 day IMF mission to Lusaka led by Mr. Tsidi Tsikata, reports have emerged that the consultations between the team and Zambia’s authorities did not yield what many within the corridors of the lender were expecting. Short of disappointment with the outcome of its mission, the IMF stated in their end of mission Press Release that Zambia’s economy was “under stress”.
“Low copper prices and a severe electricity shortage are straining economic activity. The Zambian kwacha has lost half of its value since the beginning of the year, causing difficulties for many segments of the economy and population, and putting upward pressure on inflation. Moreover, domestic and external financing conditions have tightened markedly, with increased interest rates on Zambian government debt.” Read the statement.
Although there has been no statement from the government following consultations with the IMF team, local media report that President Lungu was not willing to accept the aid package of close to $1bn, whose conditions included removal of fuel subsidies and putting on hold some of the capital projects underway.
Majority of the capital projects including road construction are being undertaken across the country especially in rural areas. Although the country is experiencing mass power shortages and a weakening Kwacha, government-funded construction works are providing thousands of jobs to unemployed Zambians and are well-received in rural Zambia which has not seen this level of investment in infrastructure projects in the recent past.
President Lungu faces an election in less than 12 months and he knows very well the risk of accepting such conditions; the forthcoming elections are expected to be tightly contested. Although there is general discontent among the urban voters, past elections under similar circumstances have been decided by rural voters- President Lungu seems to know this too well.
The statement from IMF further states that both the mission and authorities “reached a shared understanding on the current economic challenges and the implications of alternative policy choices”. The statement was however not clear on what the ‘alternative policy choices’ were.
Local media reports that IMF was hoping Zambia would accept the aid package just as Ghana did just over a month ago. The West African country accepted a $918 million bailout from IMF to help stabilize its local currency, the Cedi. Ghana also accepted the conditions attached to the package.
President Lungu’s opposition to the package has been praised by some sections of society in Zambia. Most Zambians still remember the effects of IMF’s interventions in the late 1990s which saw the implementation of a large scale Structural Adjustment Programme (SAP). SAP has been blamed for the closure of most industries in Zambia and subsequent job losses that followed the privatisation of most government run entities.
President Lungu may have been brave in turning down this offer from IMF, he will however be judged by the next steps he will make aimed at saving the economy of southern Africa’s politically stable and peaceful country. Will he be looking to the East?