Zambia Finance Minister Sees IMF Loan Agreement by March 2017

  • Budget deficit forecast to exceed 10% of GDP this year
  • Economic growth remains low at 3%, Mutati tells lawmakers

Zambia may agree to an International Monetary Fund support package in the first quarter of 2017 as it seeks to boost sluggish economic growth and narrow a fiscal deficit that will exceed 10 percent of gross domestic product this year, the finance minister said.

The economy will expand “just over” 3 percent in 2016, about the same as last year, Felix Mutati told lawmakers Thursday in Lusaka, the capital. The government of President Edgar Lungu, who won disputed elections in August, will focus on cutting energy subsidies, collecting more tax and paying off arrears as part of an economic recovery program, he said.

Growth in Africa’s second-biggest copper producer has reached a 17-year low amid a plunge in metal prices, a power crisis and rising government spending. While the government has relied on selling dollar debt to fund the growing deficit -- raising a total of $3 billion since 2012 -- further dollar debt issuance may be costly until an IMF deal is in place. A delegation from the Washington-based lender arrived in Lusaka this week, and talks about a loan package will begin at a later date, Mutati said.

“Before any program details are agreed upon, cabinet and other economic stakeholders will be consulted and any final agreement, if appropriate, would be expected in the first quarter of 2017,” he said. “We should not turn away from financial and technical assistance and instead take charge and utilize the support.”

Zambia previously said it planned to sign a loan agreement of at least $1.2 billion by the end of the year. The energy regulator last week increased fuel pump prices by nearly 40 percent as part of efforts to cut subsidies in preparation for an IMF program.

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