During a Q&A session, Georgieva highlighted the need for a more comprehensive definition of resilience that includes strong social protection, an inclusive economy, gender equality, and a resilient planet. She also noted that Zambia has potential for generating income from other minerals and tourism sites, in addition to copper mining. The event was organised by the University of Zambia’s Department of Economics, the Economics Association of Zambia, and the Economic Association of University of Zambia Students with Tervin “Smart” Mukemu serving as the event’s moderator.
Kristalina said that she spent 14 years teaching back in her native Bulgaria, in the Political Economy Department, making her the first person from an emerging market nation to lead the IMF. She expressed her appreciation for the organisation’s leadership among economists. She added the IMF has 190 members and is a burgeoning cooperative. During COVID-19, when Honduras joined the group, the organization expanded. The IMF has greatly improved upon the fundamentals it has acquired throughout the years.
DISCUSSION ON HOW THE IMF PROGRAMS WILL IMPACT ZAMBIA POSITIVELY
The global economy has seen the rise of COVID-19, which brought the global economy to a standstill. Secondly, the Invasion of Russia over Ukraine has caused food and energy prices to rise up dramatically. These two factors combined together led to inflation and that meant that Central Banks needed to intervene by increasing interest rates. Economies with stronger understanding of the fundamentals withstand these shocks better than those that are weaker.
Traditionally, the IMF would think of the narrow concept that applies to Fiscal Monetary perimeters and the financial system. Having a strong Banking sector or having a strong Fiscal position is not enough. We have to think of resilience in a more comprehensive manner. Educated people with good health and good social protection can withstand the heat. A resilient society, not just with a strong economy, but, also an inclusive economy (one which the social fabric is strong) means more equality.
Any country that does not allow all its people to participate and contribute will have slow economic growth. A more resilient planet is needed. In 2022, there have been climate shocks in the whole world and here in Zambia, the nation is experiencing an energy crisis which is partially anchored in the fact that climate variability affects hydro-power production. Therefore the IMF is working and seeking to help Zambia in three areas first, which are:
- Governance: A government which is more resilient and inclusive to its people is better, so that it can have more people that are well informed and involved with whatever the government is doing and also support the government. This also includes fighting the cancer of corruption.
- Provide support: This will produce more dynamic growth which will lead to a more diversified economy. This means creating more jobs for the people and support internal revenue which should contribute towards both monetary and fiscal policy.
- Social spending: A big recommendation to the government of Zambia is to remove public money from where it is being wasted to where it is more useful. This includes eliminating subsides from where it is mostly benefiting rich people and spend it more into education and social activities. This has given a privilege to every child in the nation to have a right to education. This will support more skill development because the government in investing more in human capital.
With the support as IMF, social spending should more than double, from 2020 to 2025, 0.7% of GDP to 1.6% of GDP. We also expect that the program will deliver much needed micro-economic stability by shifting from a deficit, which is from 6% of GDP deficit to 3.2% surplus by 2025.
How do you see Zambia develop having been much dependent on the copper mining?
Zambia is known been a good producer of copper of course but Zambia has many other minerals which it can produce and create jobs too and also generate external income as well. Zambia has got so many tourism sites of which includes the national parks. If the government can also put much efforts towards maintaining and investing in them, they can be of a very good at income generating and also creation of employment.
QUESTIONS AND ANSWERS FROM THE AUDIENCE
How does the IMF plan on partnering with Zambian towards ongoing program to insure that the grassroots are benefiting from the program itself?
The IMF is a small organization, having 4,000 people working against 190 members. IMF is one institution that is mandated to listen to the pulse of all its members on a regular basis. We have representatives in all our member countries, through them we engage civil societies and small business enterprises. This is because we want to be better informed not just from above but also from the bottom in order for us to have the necessary information and to also hear the problems our members are facing. We work with other specialities and experts elsewhere in order to provide policy analysis and also provide instrument which include financial and technical support in order to help out member improve their economies.
How do you plan to help out African nations towards mental health since it is one of the key drivers towards development?
One of the projects IMF is working on is also in the line of mental health. We have programs coming which are targeted on helping and also improve mental health. We believe that for any nation to attain development, people must be in good health.
Zambia was the African country to default from the Eurobond payment, does this bring any complications over the debt restructuring process?
Today the lenders are more much a diverse group than they were late 20 years ago. When HIPC was designed, it was very fairly straight forward there was a majority of countries, the members of the Paris Club and it was easier for debt reduction and forgiveness, but today, it’s not like that anymore. The fact that Zambia defaulted on the Eurobonds and other bilateral conditions or other commercial creditors makes discussions for Zambia much more complicated. Current creditors being a much more diverse group makes it more difficult to reach a common position and impacts the length of negotiations.
On the G20 framework., must we contend with the fact that China will merely extend our maturities and not reduce on what we owe, and what must we do?
The common framework is relatively new, it was put in place in 2020. It is about bilateral and private sector creditors forming a committee and coming into an agreement at a country level. Historically we have to remember that most of the credit institutions took time to reach maturity. For instance the Bred Bonds 8 years, HIPIC 10 years, and the Paris club took 40 years from initiation to the maturity it has today. Unfortunately we cannot expect that the framework would step into action from day one with full clarity on how decisions are made and predictability of these decisions. We the IMF are arguing strongly that there has to be three improvements to the framework:
- From the moment the credit committee is formed there has to be predictability on the process of reaching conclusion.
- The resolution of technical issues such as what is the line that separate debts that can be restructured from those that cannot. Countries need financial help, for instance in the case of Sri Lanka, we (IMF), were asking India to provide financing. India said “We will, but, will that fall under restructuring, are we going to be penalized for it? Because we are rescuing a nation out of a crisis.” These technical questions must be sorted out first before we do anything.
- We are arguing the common framework should include middle-income nations like Sri-Lanka, Lebanon, and Pakistan if necessary. When we go into the Zambia case, China for Zambia is a very significant creditor. China is a newcomer in restructuring negotiations on multilateral basis. China internally is still working out to how best make decisions among the many parties that participate in lending to parties like Zing Bank, China Development Bank, Private Companies, SOE’s and that is still an ongoing process. We need to recognize that China as the newcomer still has to build up itself own institutional capacity to participate. We have negotiated with the authorities in China and more especially on Zambia and technical issues will be resolved.
