We have Agreed on Fiscal Discipline With IMF – Yamba

Fredson Yamba
Fredson Yamba

Lusaka, 22 April 2016

You will recall that during the period 9th-18th March 2016, an IMF team visited the country in line with the commitment for continued engagement between the Zambian Authorities and the Fund.

The visit and subsequent discussions mainly centered around Zambia’s macroeconomic situation; and discussions on the possibility of engaging the IMF in a formal programme within 2016, as directed by Cabinet.

During the visit, the Fund team also held discussions with non-state actors.

The Government and the fund then agreed on the need for:

– Effective fiscal consolidation measures in 2016 and beyond;

– Full commitment to austerity initiatives as the current level of the budget deficit is a challenge;

– Full adherence to the provisions of the amended constitution under which Parliamentary approval is required for any supplementation before Ministries, Provinces & Other Spending Agencies could spend above budget;

– structural reforms such as the shift to cost reflective electricity tariffs and domestic fuel pump prices to facilitate tenable reduction in subsidies;

– streamlining Government expenses; and,

– Implementing a functional debt management strategy.

FOLLOWING ON THESE DISCUSSION, further discussions were held at the just ended 2016 Spring Meetings in Washington, USA, whereby the Zambian Government and the IMF agreed to have some milestones that will eventually lead to the country getting on a programme by the fourth quarter of 2016.

In line with the roadmap, the IMF will be provided with Zambia’s macro and fiscal plans for the 2017 Budget and the medium term, in June 2016 in line with the national budget calender.

This is meant to pave way for their input so that once in place, the programme will not be at variance with the budget because a large portion of the programme is executed through budget implementation.

Further, the Fund will field a mission in September 2016 to finalize budget numbers with Zambia taking into full account the adjustments that will be required for a programme.

This will be followed by programme discussions in October/November 2016 with a view to have Board discussions around mid December 2016.

One key policy issue to accelerate in the coming weeks will be the tabling before Parliament, proposals on the Mineral Royalty Tax (MRT) Sliding Scale. This is meant to have a tax regime that is responsive to changes in metal export prices.

With respect to Zambia going on an IMF programme, the Government is fully resolved, and as directed by Cabinet, this is inevitable.

In the meantime, Government will work towards setting the stage for the necessary adjustments in electricity tariffs and fuel pump prices, while ensuring that austerity measures announced by the President in November 2015 are diligently enforced.

Thel measures have started bearing fruit as seen in the enhanced borrowing discipline that ensures we remain within budget in our quest to finance the deficit.

Further, the appreciation of the exchange rate attests to not only the positive impact of the measures taken by the central bank but also the fiscal consolidation measures taken by the central government.

Fredson Yamba
Secretary To The Treasury