ON SATURDAY, Minister of Finance Bwalya Ng’andu confirmed that Government has started re-engaging the International Monetary Fund (IMF) for a possible bailout package. He also confirmed that the IMF has agreed to bring back a resident representative to Zambia to help in the process of engagement. The previous envoy, Alfredo Baldini, was recalled at the end of August last year after protracted negotiations over a failed bailout.
Admittedly, the IMF and the World Bank are not the most popular institutions in Zambia. In fact, when the negotiations for a bailout collapsed, there are some among our people who welcomed the news.
These are the people who cite the IMF’s Structural Adjustment Programme (SAP) as having brought misery on the country. They also blame the IMF and World Bank for Zambia’s past debt which eventually led to foreign debt forgiveness in 2005. Oxfam, in its 1996 report titled Multilateral Debt: The Human Costs, accused the World Bank and the IMF of creating a “bizarre financial circus in which more and more aid was being recycled in the form of debt repayment while the debt stock was increasing” for poor countries like Zambia.
The debt forgiveness came at a cost. The country had to attain certain benchmarks as one of the Highly Indebted Poor Countries (HIPC) to qualify for debt forgiveness.
One of these conditions required privatising certain State-owned enterprises. A number of parastatals were privatised, including the units or divisions under the Zambia Consolidated Copper Mines (ZCCM), which was the goose laying the golden egg for the country. Most of the mining deals turned out to be disastrous. In fact, the degeneration of life on the Copperbelt, where most of the ZCCM units were located, was blamed on the privatisation of the mines.
Most of the mines were privatised under the first administration of the Movement for Multi-Party Democracy (MMD) of President Frederick Chiluba. However, HIPC was only attained in 2005, which was towards the end of his successor Levy Mwanawasa’s first term as President. Knowing how opposed the Zambian public was to further privatisation of the remaining parastatals, notably Zesco, Zamtel and Zanaco, Mr Mwanawasa sought a compromise with the IMF. In place of privatisation, he proposed commercialisation, which the IMF thankfully accepted. To date, Zesco remains a symbol of the country’s resistance to the IMF policies which some members of the public believe have been disastrous for the country’s socio-economic life.
In fact, this is the reason why some celebrated the news of the failed IMF bailout to Zambia because they thought the Bretton Woods institution will insist on the privatisation of Zesco or an astronomic hike in electricity tariffs.
You can, therefore, understand why the IMF is not wholly popular.
However, we need to understand the role of the IMF. This is a specialised agency under the United Nations which provides policy advice to countries in economic difficulties. It also helps to achieve macro-economic stability. With its own governing structure, it also provides routine economic surveillance of its member countries. In fact, it is the first institution that multinationals, investors and indeed donors rely on when it comes to assessing the economic performance of a country.
We know what the IMF’s position on Zambia’s debt is; it has expressed deep concern on public debt, which it believes is the main cause of the deterioration of the country’s economy. It believes that the debt, if not well-managed, will put the country in debt distress.
This is why engagement with the IMF is crucial.
Our external debt stood at US$10.23 as at June this year, while domestic debt was at K60.3 billion. In his budget address, Dr Ng’andu said as a key strategy to stimulate economic activity, he has increased the allocation towards dismantling of arrears to K2.3 billion in 2020 from K437 million in 2019. Further, Government will reduce borrowing from the domestic market to 1.1 percent of GDP from 1.4 percent of gross domestic product (GDP) in 2019.
While this is welcome, we also need to worry, as a country, about the external debt, whose interest payments have been escalating, causing a switch in expenditure from social protection while triggering accumulation of domestic arrears.
Why is the IMF bailout crucial? IMF loans are normally interest-free or low interest financing. Experts say the nation is currently entitled to a quota of US$1.3 billion as IMF. They believe that with a standby bailout package, Zambia can pay off the full amount of the US$750 million in 2022 and then also another US$562 of the US$1 billion Eurobonds in 2024. In the 2020 budget, Dr Ng’andu has allocated K636.0 towards redemption of the Eurobond.
Simply put, an IMF bailout will be a confidence vote for the country and will help in its economic growth recovery efforts.
However, having supported an IMF bailout, we do not believe that that alone will solve the country’s debt problem. We need to continue pursuing other avenues, including tight fiscal policies.

Mineworkers Unions of Zambia (MUZ) president Joseph Chewe has urged government to prioritize the awarding of mining licenses on the gold deposits found in North-Western province to Zambians.

In an interview, Chewe said the country had long suffered with foreign investors who continued to externalize huge revenues from their mining operations to other countries.

“This country has learnt lessons. Look at the capital flight that is leaving the country all the proceeds go to (other) countries. I can tell you that, for example, Vedanta (Resources) is a family, even FQM (First Quantum Minerals) the biggest mines in North-Western (Province); they are a family. So, I think the challenge to us Zambians to rise to the occasion and start owning some of these mines either in partnerships or bringing in other partners to develop the gold deposits that have been found in North-Western,” Chewe said.

“Otherwise, we have the potential, though we may not reach there now, but I think the President (Edgar Lungu) must drive that one day, a Zambian should own a mine, which should be run as profitably and efficiently. So, I think the gold deposits in North-Western should be an eye-opener and I think the President should encourage Zambian ownership because there’s no money that is being left in the country. So, it will mean just a name having gold here in Zambia; beneficiaries are outsiders! Look at Switzerland; Switzerland is a country where billionaires are sitting and syphoning money there.”

He said Zambians had a successful trackrecord of managing mining companies, citing the old ZCCM as a success story.

“Yes, we may not have resources as a country, but I think we need to start somewhere. I can tell you that, currently, there are Zambians running KCM; you have seen how production is now going up. Even Mopani, the people that are actually doing the mines are Zambians, so, we have the capacity. What we just need is capital and also sustainability. We have run the mines before; ZCCM was one of the best companies in the world and foreigners destroyed it! So, we still have that capacity. We have the capacity, we have the brains,” argued Chewe.

But in a separate interview, Zambia Chamber of Mines president Goodwell Mateyo stressed that the challenge for locals to own mining companies lay mainly with the need to mobilize large capital investment.

“There is nothing wrong when equating Zambians from applying for mining licenses. But, of course, there is a challenge of mining being largely capital intensive and, therefore, what Zambians would need to be able to make that work is to have access to big fields of capital and finance because it is a highly capital intensive venture and it has very long time to profitability; that is the biggest obstacle into Zambians owning (mines), not to say that we can’t run or we can’t own mines, but Zambians are free to apply for mining licenses and a number of them are holders of mining licenses. But when it comes to developing them and working them, the biggest challenge is access to finance. Because, locally, we don’t have a sort of big pools of capital that will work a large mining enterprise endeavor for a period say, 15 to 20 years, from the time you start exploration to the time you actually start mining unless you can access it from abroad. That is the reason why Foreign Direct Investment (FDI) is still critical in the working of mines in Zambia,” said Mateyo.