The International Monetary Fund (IMF) team has arrived in the country to negotiate a new financing programme with the Zambian government following major financing challenges the government is facing.
But according to information obtained by the Daily Nation, the IMF is unlikely to agree to the new proposed programme by the Zambian government because of the huge fiscal deficit that has been created by new civil servants salaries as well as the poor human rights record the country has earned under the new government.
This follows reports that preparations of the Patriotic Front (PF) second national budget has stalled while a wage freeze is likely to be imposed on civil servants next year resulting from the K1.4 billion per month wage bill which has been occasioned by the 200 percent salary increases for civil servants.
The K1.4 billion per month that would be spent on the new civil servants salaries represents nearly 70 percent of the Budget but the figure does not include the army, National Assembly, the intelligence and other government spending agencies.
Finance Minister Alexander Chikwanda is said to have pleaded with the IMF to come to Zambia so that they could look at the new financing programme before he could prepare and present the new budget which is expected in the first two weeks of October after the resumption of Parliament this Friday.
Sources have explained that should the IMF refuse to acknowledge the new programme, the resultant effect would be that the donors would withhold their money as their support and financial aid to Zambia solely depended on the assessment by the fund.
The source explained to the Daily Nation that should the IMF disagree with the government’s budget programme, the Minister of Finance had worked out a contingency plan which would be to borrow a further $1 billion from the Euro Bond adding a cub memorandum has been done to this effect.
The borrowing of the $1 billion would largely depend on the assessment report by the IMF and it is highly unlikely that the Zambian government would be able to borrow the money.
“The IMF arrived in the country yesterday (Monday) on the invitation of Minister of Finance Alexander Chikwanda. They are in the country to negotiate the new programme of how Zambia can be supported financially. As you may know, the Ministry of Finance is in the process of preparing a budget but the process has stalled because the IMF has been against the government’s excessive expenditures on salaries.
The IMF is also unlikely to agree with government’s new spending programme because of the huge fiscal gap and the poor human rights record Zambia has earned itself under the new government,” the source said. The K1.4 billion per month consumption expenditure has created a huge fiscal deficit and to cover the gap, the government has decided to recall K700 million from the Euro Bond which was meant for the recapitalization of Zambia Railways and Zesco.
The recall of the K700 million Euro Bond is against the premise on which government had borrowed the money and in trying to bridge the gap, government had planned to borrow a further K2 billion from the open market but only realised K350 million because there is no money in the economy.The $750 million Euro Bond was borrowed on the premise that the money would be strictly invested in economic infrastructure development like the construction of roads and universities among others.
The source stated that following the huge budgetary deficit that has been created as a result of 70 percent of the government revenue being consumed by salaries, government was planning to impose a wage freeze next year as a measure to mitigate the financial crisis.Among other measures government has taken to control the country’s financial crisis are the recalling of all road contracts and other contracts in the infrastructure development sector for either re-evaluation or deferment.