The decision by Zambia’s President Hakainde Hichilema to obtain a bailout loan from the International Monetary Fund (IMF) has been challenged by Sean Tembo, President of the People’s Party (PeP). Mr Tembo has raised concerns over the President’s one-man decision to seek the IMF bailout without any cabinet scrutiny or debate.
In his statement, Mr. Tembo claimed that the President’s decision to obtain a bailout loan from the IMF, only 8 days after taking office, was a “one-man decision that was devoid of any cabinet scrutiny or debate.”
Mr. Tembo also criticized President Hichilema for not responding to his challenge to explain the necessity and benefits of the IMF bailout program. According to Mr. Tembo, “our economic prospects appeared stable at the time.” He added, “Our biggest export earner; copper was trading at about $10,000 per metric tonne, our gross foreign reserves were the highest in since independence at about $3 billion, the exchange rate was around K15 per dollar, the price of breakfast mealie meal was around K120 etcetera.”
However, Mr. Tembo praised the first Minister appointed by President Hichilema, Hon. Situmbeko Musokotwane, for attempting to justify the IMF bailout program. “His main argument was that the program was necessary as it would allow the country to obtain debt relief,” he said. Yet, Mr. Tembo criticized the Minister for not giving a “solid explanation” when pressed about the specifics of the targeted debt relief and how the IMF would deliver it.
Mr. Tembo believes that the President’s decision to use the IMF to achieve debt relief was flawed. “You see, when you talk about debt relief you are essentially asking your creditors to give you more flexible terms of payment,” he said. “This is either by increasing the payment period so that your repayment instalments can be smaller or giving you a repayment holiday of say a year or two so that you can have space to reorganize your finances or something to that effect.”
According to Mr. Tembo, the country had already defaulted on its creditors at the time of the IMF program, making debt relief more difficult to achieve. He also stated that the IMF was “a wrong vehicle to use to achieve debt relief or indeed debt cancellation” because most of Zambia’s foreign debt was commercial debt owed to institutions and not sovereign debt owed to governments. “In fact, out of the $12 billion, the largest sovereign debt of about $6.6 billion was owed to China,” he said. “It is extremely difficult to re-negotiate commercial debt, but sovereign debt can be negotiated because you can appeal to the moral guilt of the creditor nation. But in the case of China, the approach really matters and a pro-western vehicle like the IMF cannot work when it comes to negotiating with China.”
Mr. Tembo advised President Hichilema at the time that the country would have a better chance of success with debt relief and possibly even debt cancellation if they engaged the individual creditors directly instead of using the IMF. “When we were contracting this debt, we engaged our creditors directly and it is only respectful that now that we have problems paying back, we must engage them directly again to explain to them and to ask them how they can assist us,” he said. “Most of our bilateral creditors feel disrespected if not outrightly insulted that instead of engaging them directly regarding debt relief, we are asking the IMF to do it for us.”
Fast forward to 15 months later, and the government has implemented all the IMF conditionalities, with most having a harsh effect on the Zambian people. The amount of fertilizer allocated under the Farmer Input Support Programme (FISP) was cut to the extent that 12 farmers were sharing one bag of fertilizer in medas. The medicine grant to health facilities was also cut, leading to patients having to buy over 90% of their needed medicines and consumables from private pharmacies. Electricity tariffs for connection and meter separation were increased by more than 1,000%, and fuel pump prices were increased by more than 70% in the past 6 months, with a monthly review. The government also exported electricity while loadsheding the nation, leading to dire consequences for the economy.
Despite the government implementing all the harsh IMF conditionalities, the IMF was unable to deliver the promised debt relief. The Minister of Finance was crying in the media every day, asking the IMF to deliver the debt relief since they had implemented the IMF conditionalities as instructed.
