Zambia should access emergency funding from the International Monetary Fund to prevent further deterioration in the economy, according to Situmbeko Musokotwane, a former finance minister in Africa’s second-largest copper-producing country.
A team from the Washington-based lender visited the country this month at the invitation of the government to assess the state of the economy and Zambia’s responses to the fiscal issues facing the country. Neither the government nor the IMF mentioned the possibility of talks about an economic program in statements released at the end of the tour on Nov. 20.
“Zambia is quickly running out of money,” Musokotwane said in an e-mail Tuesday. “It is incumbent upon the government to agree with the IMF on a program that not only stabilizes the economy, but also quickly restores investor confidence and re-kindles faster economic growth as it was before.”
The southern African nation has been hit by copper prices that have fallen to six-year lows just as a power crisis hobbles production. Government overspending is also hurting the economy, the IMF said in its end-of-visit statement. The currency has lost 45 percent of its value against the dollar this year and mining companies including the local unit of Glencore Plc are cutting output and retrenching thousands of workers.
Zambia is resisting an IMF deal to avoid the strict conditions that will accompany it, said Musokotwane, who was finance minister from 2008 to 2011. President Edgar Lungu’s government doesn’t want to cut spending before general elections next year, he said.
A spokesman for Zambia’s Finance Ministry didn’t answer a call to his mobile seeking comment.
Irmgard Erasmus, an analyst at NKC African Economics in Paarl, near Cape Town, agreed that the government should get financial help from the fund.
“Zambia needs to urgently agree to a rescue package with the IMF to meet borrowing requirements and re-establish investor confidence,” she said in an e-mailed note to clients Tuesday.
BY Matthew Hill, Bloomberg