Editor's Comment

It’s time to bite the bullet

LUSAKA city.

THERE is absolutely no need for apprehension from citizens about Government’s impending engagement of the International Monetary Fund (IMF).
The bringing on board of the IMF is an honest assessment of the country’s economic malaise which has to be overcome.
While Government is determined to overhaul the economy and better the welfare of citizens, there are tough measures that must be taken to re-align the economy.
These measures include the removal of subsidies, which bloat the already oversized government expenditure.
Government has been generous by biting the bullet on behalf of the citizens by providing subsidies.
However, subsidising has been at huge cost to the treasury which has adversely affected service delivery.
For a government keen to reverse decades of economic stagnation, especially in infrastructure development, subsidies have not been helpful.
That is why IMF head of mission to Zambia Tsidi Tsikata says the country’s current economic challenges can be overcome with policy actions such as removal of subsidies on fuel and electricity.
During a briefing yesterday, Mr Tsikata said the Zambian economy has continued to be under stress from the impact of external and domestic shocks and an unbalanced policy mix.
He said the IMF Mission and Government discussed a broad range of measures to create fiscal space for beginning to clear Government’s arrears, scale up social spending and reduce the fiscal deficit in 2017.
Mr Tsikata said adjustment will help to put public debt on a downward path and allow monetary policy to gradually unwind the current tight stance to result in economic recovery.
He has explained that Zambia’s economic challenges can be overcome with policy actions such as recent adjustment of fuel prices to cost-reflective levels and the intention to reduce electricity subsidies.
These measures, if coupled with structural reforms to reduce inefficiencies, will help increase Zambia’s potential growth.
He said the pace of economic activity remains sluggish in 2016 with growth projected at three percent due to continued electricity shortages, low exports and subdued private sector consumption and investment.
By asking the IMF to come on board, Government has agreed to be peer-reviewed as it embarks on a journey to rescue the economy for the benefit of the citizens.
It is not a secret that due to subsidies, public finances are severely strained, thus contributing to economic performance in 2016 which was characterised by shortfalls in revenue and substantial spending overruns on fuel and electricity subsidies.
In the long run, this led to Government defaulting on payment arrears to suppliers and contractors.
This stock of arrears is projected to increase from K10 billion at the end of 2015 to K20 billion at the end of 2016, which threatens to choke the economy and reverse the economic gains made so far.
Owing suppliers means restricting economic activities because those owed money are unable to re-invest.
Suppliers will also stop servicing Government, whose operations will be hampered by lack of goods and services.
Already, huge stacks of maize are marooned in the countryside because transporters are refusing to ferry the maize to safety because they are owed huge sums of money by the Food Reserve Agency for the grains transported a few years ago.
This could adversely affect the country’s food security because maize could go to waste with the onset of the rains.
So, Government has to remove some subsidies to save money and pay suppliers.
There should be no apprehension because the IMF has not yet agreed any financial package with Zambia.
The IMF has so far been just visiting the country to help assess the current economic situation and provide policy advice to restore macroeconomic stability and promote broad-based economic growth.
Besides, this people-centred Government will not sign a bailout package blindly because it has to take a lot of issues into consideration.

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