GOVERNMENT should consider accepting the International Monetary Fund (IMF) financial offer even if it is a bitter pill to swallow to boost confidence in the market, says Bankers Association of Zambia (BAZ) chief executive officer Leonard Mwanza.
Speaking in an interview, Mr Mwanza suggested that Government should consider accepting help from the IMF given the strong economic headwinds Zambia was experiencing.
He said the IMF was a ‘‘holistic path to take’’ especially that Government only had two options to access financial help – either to continue borrowing euro bonds from international private sector at a high rate or accept the IMF prescription.
Mr Mwanza said the IMF offer if taken would bring about confidence in the Zambian economy as compared to borrowing from international markets.
“When you start taking the IMF route, you start taking the bitter pill with serious prescription and everyone….following through and leaving the pain,” he said.
Mr Mwanza said the IMF would also correct the strong headwinds Zambia’s economy was experiencing as it did in the period Government accepted its help.
“We would have loved at this stage for Government to at least allow the IMF and consider their offer. We hope that Government will weigh the options it has at a certain point,” he said.
Mr Mwanza however expressed confidence that Government had done its homework and was fully aware of what it was doing.
“The IMF tried to discuss best ways to come out of these challenges and so if Government has decided not to take the IMF prescription, they see things from different ways and have done their homework,” he said.
Meanwhile, Mr Mwanza said the decision by Government to reduce borrowing from local banks would push down interest rates on the Treasury bills.
He explained that if Government’s appetite to borrow was subdued, it meant that there would be less demand from the borrowing side, hence reducing interest rates and Treasury bills.
Mr Mwanza also said banks did not set interest rates but reacted to the market, adding that if there was the containment of consolidating the fiscal side then there would be less effects that could be passed on to the clients.
“If interest rates and Treasury bills come down, there will be a trickledown effect in terms of structure in the market because Treasury bills would be a risk-free rate.
‘‘Once that happens, it is a welcome move because lending interest rates will be pulled down. We will see how it plays out in 2016 because for now these are just pronouncements; the key is if we are going to see the firm commitment and fiscal discipline,” he said.