Economics Association of Zambia (EAZ) has backed the staff-level agreement on a proposed US$1.5 billion International Monetary Fund (IMF) Extended Credit Facility (ECF), saying the financing will support macroeconomic stability and Zambia’s economic transformation agenda.
The proposed 36-month IMF arrangement is subject to approval by the IMF Executive Board and the fulfillment of applicable prior actions.
EAZ National Secretary Dr. John Musantu said a stable macroeconomic environment, characterized by controlled inflation, affordable interest rates, a stable exchange rate and sufficient international reserves, is critical to the successful implementation of the Grow Zambia Agenda.
Dr. Musantu said financing will also be key to supporting the country’s ambitious goal of expanding key sectors and doubling the size of the economy.
He urged Government to optimize domestic borrowing while ensuring that the private sector, particularly small and medium-sized enterprises (SMEs), has adequate access to financing.
“The Grow Zambia Agenda is only sustainable and feasible if the country can create a thriving and profitable private sector,” Dr. Musantu said.
He noted that excessive domestic borrowing could crowd out private sector investment, as financial institutions may prefer lending to Government through securities rather than extending credit to businesses.
Dr. Musantu said Zambia would therefore need to mobilize additional external financing, particularly foreign direct investment (FDI) and concessional loans, to adequately fund its development ambitions.
“In terms of debt, the best form is concessional loans, and this is what we should prioritize as a country,” he added.
He described the proposed IMF facility as a welcome development, noting that its concessional terms, including zero interest, would help Government stabilize the macroeconomic environment and support economic growth.
“The facility comes at zero interest and will greatly facilitate for the stabilization of the macroeconomic environment, an enabler that is key in the countries growth agenda,”he stated.
Dr. Musantu added that the agreement comes at a time when the economy is facing external shocks arising from geopolitical conflicts affecting global oil markets, as well as unfavourable weather patterns that could affect the energy and agriculture sectors.
He said the proposed facility could also help reduce Government’s participation in the domestic credit market as it meets its expenditure obligations, thereby creating more room for private sector borrowing.
“The EAZ welcomes the $1.5billion IMF Extended Credit Facility Staff-Agreement and encourages government to continue on the path of transparency in information disclosure to allow for productive economic discussions as the country embarks on the ambitious project to double the size of the economy,” Dr. Musantu said.
The Association further urged Government to maintain transparency in economic information disclosure to encourage informed public debate and support the implementation of the Grow Zambia Agenda.
