Wednesday, May 04, 2016

IMF intervention will result in terrible living conditions - Prof Chigunta

COMMENT - This is all very predictable. When the cost of living gets high enough, there are going to bei IMF Riots, using the term of the former World Bank Chief Economist Joseph Stiglitz.

IMF intervention will result in terrible living conditions - Prof Chigunta
By Chambwa Moonga |
Updated: 03 May,2016 ,12:06:27

PROFESSOR Francis Chigunta says there would have been no need to resort to an IMF intervention that will primarily result in terrible living conditions for citizens had the PF government listened to stakeholders’ alarm over the country’s deteriorating economy.

Prof Chigunta, who served as political advisor to former president Rupiah Banda, said while it was realistic that countries under severe economic challenges sought recourse from the International Monetary Fund (IMF), Zambia could not have degenerated to that level had the government valued economic expertise from various commentators.

Last Friday, the Zambian government announced that it had accepted an IMF programme to be implemented after the August 11 general elections in the fourth quarter of 2016.
According to Secretary to the Treasury Fredson Yamba, both the IMF and the Zambian government agreed to commence the programme in line with the 2017 national budget.
Yamba also stated that the government would work towards making necessary adjustments in electricity tariffs and fuel pump prices.

“What I’m going to say about the IMF programme is that well, countries seek recourse to the IMF when they begin to face challenges, especially in terms of imbalances in their finances, because that’s the primary purpose of why the IMF was established - to help countries deal with financial problems that they face due to either external or internal shocks. In many cases, those shocks are actually worsened by weak or poor economic management as is currently the case in Zambia. The situation has been compounded by external shocks like the fall in the price of copper and internal shocks like policy inconsistencies, weak revenue collection and so on,” Prof Chigunta said in an interview yesterday.

“We shouldn’t have actually been going to the IMF if government had listened and adhered to the advice that various people, including me, have been offering in the past. Remember, we’ve been there before. All it required really was a strong economic management and that’s prudence in terms of public expenditure. We don’t really have to tell the government how to look after the finances or how to run the economy but because of some weaknesses in economic governance, that’s why we’ve found ourselves in this challenge.”

He lamented the government’s poor fiscal policies and said the IMF economic programme the government has agreed to implement after elections will come with hard-hitting conditionalities on citizens, especially those who are already vulnerable.

“The IMF programme comes with tough conditionalities and because of those tough conditionalities; these programmes are usually shrouded in mystery,” Prof Chigunta warned.

“Conditionalities in the case of Zambia, for example, from what I understand, demand that Zambia has to remove fuel subsidies or to do some [upward] adjustments in the fuel pump price, electricity tariffs and the exchange rate. Now, you understand that when you remove subsidies on those items, immediately the cost of living is going to shoot up.

It’s already high but it’s going to worsen. So, my fear is that the living conditions after elections for the majority of people will be terrible because of those economic recovery efforts that will be necessitated by the IMF austerity programme. So, we need to be very careful and look at how the programme is going to impact on the vulnerable population.”

And on President Edgar Lungu’s statement in Chipata on April 17 that the government had decided to sign a Statutory Instrument (SI) to regulate and reduce the price of mealie-meal which was high in some parts of the country, Prof Chigunta charged that such a move was “very untenable and is totally inconsistent with the IMF economic programme which the government hopes to implement.”

“It (SI) will seriously affect the performance of the agriculture sector in Zambia. When you try to impose price controls, you don’t give incentives to farmers and so, the result is that maize production in the country may be affected and if it is affected, it actually worsens the same problem which the government is trying to cure. So, price controls are not the solution but the solution is to review our agricultural policy,” advised Prof Chigunta.


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