Zambia Finance Chief Mwanakatwe Targets IMF Program by Year-End

LUSAKA (Capital Markets in Africa) – Zambia’s Finance Minister Margaret Mwanakatwe said she’s in talks with the International Monetary Fund about securing a financial package and has taken the necessary steps to ensure the southern African nation qualifies for support.

“I would want to see a program with the IMF, I think it would be good for us,” Mwanakatwe said in an interview in Cape Town on Tuesday. “I would love to see something in place by the end of the year. That is why we put in place various measures to ensure that we have a way forward that is sustainable debt-wise.”

Zambia’s efforts since 2016 to secure a $1.3 billion loan from the Washington-based lender have been stalled by concerns over its borrowing plans. While the yield on the government’s $1 billion of notes maturing in 2024 has dropped 275 basis points this year to 13.02 percent, its spread over U.S. Treasuries remains the highest in emerging markets among countries that aren’t in default.

IMF officials visited Zambia in November and are due to return in March for three weeks, where the package will be on the agenda, according to Mwanakatwe. She ruled out any possibility of Zambia defaulting on its foreign debt.

“At that meeting we hope we can come to a meeting of minds as to what exactly they would require from us in order to engage for a program,” she said.

Other highlights from the interview:

• The minister expects Zambia’s economy to grow at least 4 percent this year. Industries being targeted for growth include mining, energy and agriculture.
• Gross domestic product is being re-based for the first time since 2010, and could show the economy is significantly larger than the data currently reflects. The review of the data is about 30 percent complete.
• The government intends abolishing value-added tax from April 1 and replacing it with a sales tax, which will be easier to collect. “We will be advocating for a lower rate of sales tax than the current VAT rate of 16 percent,” Mwanakatwe said. “We have gone through the draft of the law. We want to start engaging with the public in February, with a view to getting comments so that that we can get a final document that I can take to cabinet and to parliament.”

Source: Bloomberg Business News