By Zanji Sinkala
The International Monetary Fund (IMF) has, over the years, developed a bad reputation in many quarters stemming from the effects of its structural adjustment policies in developing countries.
The IMF has said that its policies are no longer blind to the pressing needs of citizens. But is this a reality or mere political-correct rhetoric?
Sovereign debt has especially suffocated countries in the global south in recent years, in the wake of unprecedented events such as the COVID-19 pandemic and the Ukraine War.
In their desperation to emerge from the thick of financial distress, nations have run to financial institutions such as the IMF for what they call ‘’bailout’’ or ‘’debt relief’’ measures.
However, the cost of debt has only exacerbated matters and forced already struggling countries into more debt. Sri Lanka is one such example.
The country has seen its worst economic crisis in over 70 years, following its first debt default in history in May, 2022.
Zambia is not unfamiliar with the debt-default conversation. In 2020, Zambia became the first African country to have defaulted an external debt of approximately US$17.3 billion.
At the time, the government of President Edgar Lungu asked the IMF for a bailout citing COVID-19 impact and a critical drought a year before.
And in 2021, the country’s new government of President Hakainde Hichilema signed a $1.3 billion IMF loan aimed at restructuring its unsustainable debt, restoring macroeconomic stability and growth.
Struggling to adjust
But the IMF’s so-called bailout, as usual, came with conditions including austerity measures - resulting in the slashing of fuel subsidies and turning the government’s economic projection – from a deficit of 6% in GDP to a surplus of 3.2% by 2025.
This happened some eight years after the International Monetary Fund (IMF) advised the Zambian Government to maintain its public wage bill within 35 per cent of domestic revenue over the medium term and not more than eight per cent of Gross Domestic Product (GDP).
The government then obliged by decreasing salary scales and adding some allowances to basic pay.
The results were disastrous, leading to wage ‘caps’, limiting the capacity of the teacher unions to negotiate for better salaries and conditions of service.
This was widely believed to have gone against the vision of improving access to quality education for all.
“That was a time when teachers were earning meager salaries already, and then the wage freeze came about. It was hard,’’ recalls one teacher in Lusaka, who doesn’t want to be named.
‘’Zambians have big families to take care of, so we were struggling to adjust to those conditions. Not only that, even the motivation to work dwindled,” he told TRT Afrika.
Painful package
Rueben Lifuka, a good governance campaigner said the skepticism currently being expressed by some Zambians is against the backdrop of the negative implications of IMF’s loan conditions in the past.
He however said, on its part, the government of the country should have been more realistic in approaching the IMF for any economic packages taking the implications into consideration.
“The IMF is quick to say this is a home-grown solution. They’re saying ‘the Zambian Government prepared this package, we are simply agreeing to it. We may ask one or two things, but largely, this is a home-grown solution,’’ he told TRT Afrika.
‘’A number of countries go to the IMF when they're very ‘sick’, already in an economic coma,” Lifuka explains.
The good governance campaigner however says the countries usually ‘’have to make adjustments that will inevitably be painful for the people they lead.’’
As Zambia looks to the future, analysts say it is important for policymakers to take a balanced approach to economic reforms prioritising the needs of citizens as well as sustainable and inclusive economic growth.
