BUUMBA CHIMBULU WRITES
ZAMBIA’S fiscal policy will have to be relied on for debt stabilisation as the country seeks to secure external financing from the International Monetary Fund (IMF).
The country, which is currently in talks with the IMF, is eligible to access up to US$1.3 billion worth of a pro-gramme from the Washington based lender.
Debt stabilisation is likely to be a key point as Zambia negotiates towards a potential IMF programme in the future, says Standard Chartered Bank Chief Economist for Africa and Middle East, Razia Khan.
Ms Khan emphasised the need to therefore ensure a fiscal policy which would deliver debt stabilisation.
She explained during a live webinar focused on the Zambian Market Economic Outlook that this was cardinal in accessing external financing, including the IMF programme.
“Many countries have benefitted from the IMF emergency funds but Zambia has not because its debt levels suggests that it is risky. So Zambia has looked at this hence the current discussions with its creditors.
“There is likely to be an ounce of fiscal policy, Zambia is now taking steps to try to make its debt load man-ageable and we will have to observe what the outcome of that is going to be,” Ms Khan said.
She indicated that it might make it difficult for Zambia to be able to raise any new financing externally from commercial sources for some time if the outcome of the on-going negotiation was negative.
Zambia, Ms Khan explained, had more commercial creditors and the problem was that if those commercial credi-tors were seen to be disadvantaged by any debt workout that could as well be construed as a default.
“The question is what policies Zambia should be putting in place to try to safeguard future development and safeguard its future
“Any further development just like the local currency debt market, this will have to become much more im-portant as a funding source for the Zambian market going forward,” Ms Khan said.
She however observed that Government through the Bank of Zambia had done a lot to stabilize the economy.
“The release of liquidity leading to improve local currency, debt markets outcomes. The release of liquidity to address some of those outstanding suppliers contract, this will certainly be helping the economy,” Ms Khan said.
Bank’s Head of Financial Markets Southern Africa, excluding South Africa, Kabwe Mwaba, said Zambia was al-ready feeling the impact of COVID-19 on the economy.
“Expectations is that liquidity conditions will improve if the market continues to improve. In an environment where interest rates are reducing, it is prudent to have debt repricing quite frequently because the cost of that debt reduces over time,” Mr Mwaba said.
BUUMBA CHIMBULU WRITES