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Fitch Ratings sanguine about effect of possible IMF finance program in Zambia

Xinhua, August 31, 2016 Adjust font size:

International rating agency Fitch said that an International Monetary Fund (IMF) financing program would provide balance of payments support to Zambia and unlock other sources of external financing, a Fitch statement seen on Tuesday said.

Early this month, Zambian President Edgar Lungu said the government had made great progress and reached consensus on key areas of the IMF financing arrangement.

Fitch Ratings said the IMF program would also ease the country's risks from falling export earnings as lower copper prices and falling copper production have pushed the current account into deficit.

According to the statement, an IMF program would also provide an anchor for fiscal policy, adding that the IMF has identified deficit reduction as a key priority.

"We forecast 2016 deficit to be 7.1 percent of GDP and financing options are limited," the statement said.

Improving Zambia's external and fiscal positions could ease pressure on the country's "B"/Negative sovereign rating, it added.

In April, the Zambian government announced it would seek an aid program from the IMF which was expected to be finalized by the end of this year. The IMF was expected to provide up to 1.2 billion U.S. dollars.

Among some of the conditions for the financing program include removal or reductions of energy and agricultural subsidies.

Lungu said his government will take tough decisions once the IMF program comes into effect. Endit