Tuesday, July 18, 2017

Political Instability May Derail Zambia's IMF Loan, Says Fitch Ratings
Xinhua| 2017-07-19 04:39:17
Editor: yan

LUSAKA, July 18 (Xinhua) -- Political tension could distract Zambia's plans to access an aid package from the International Monetary Fund (IMF), international rating agency Fitch Ratings said on Tuesday.

While acknowledging that the key rating drivers for Zambia remains fiscal and external deficits and their effect on public sector debt, Fitch said the key risk stemming from the current political tension if it escalated could jeopardize an IMF aid package as well as other lender's willingness to provide the southern African nation with external financing, a statement posted on its website said.

It added that progress towards an IMF program has remained slow and may be delayed further by domestic political events, adding that expectation of an IMF program was key to Zambia's B/negative sovereign rating.

Zambia has witnessed political tension emanating from last year's disputed elections. The tension has worsened following the arrest of the country's leading opposition figure Hakainde Hichilema who was arrested in April and is facing treason charges.

On July 4, President Edgar Lungu invoked Article 31 of the country's constitution which gives security wings enhanced security measures to deal with a spate of fires and damage to other public properties witnessed in the country.

The move was approved by parliament and has since been extended for three months.

During an IMF's recent mission to Zambia last month, the two parties agreed on the remaining actions needed to reach staff-level agreement and a request to the IMF Executive Board could be made next month if the two sides could reach understandings.

Last week, the Zambian leader said the IMF could go if they were not happy with his decision to invoke Article 31 which resulted in the declaration of a state of threatened public emergency.

His comments were backed by Minister of National Development Planning Lucky Mulusa who said Zambia was not desperate for an IMF aid package.

The comments have raised suspicion on the current talks with the IMF, with critics asking the government to come clean on what was happening.

Talks with the IMF began last year as the southern African nation's economy crumbled due to falling copper prices and a large fiscal deficit.

An IMF program is expected to help support the balance of payments, provide a policy anchor for fiscal and economic reforms and unlock additional sources of external financing from multilateral and bilateral lenders.

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