ECONOMIST Chibamba Kanyama has revealed that the replacement of Felix Mutati with Margaret Mwanakatwe as finance minister has not gone well with many international economic advisors on Zambia.
Last week, President Edgar Lungu demoted Mutati and moved him to the Ministry of Works and Supply in his first major Cabinet reshuffle ever since becoming Head of State in January 2015.
Mwanakatwe was commerce minister before being moved to finance.
In his Facebook posting on Saturday, Kanyama said despite his own optimism about the President’s decision, most of the international observers he knew expressed negative feelings.
Kanyama stated that after coming back from his International Monetary Fund (IMF) mission where he served as communications advisor, he had several engagements with Mutati over the country’s intention to engage the Fund for an economic bail out plan.
He stated that despite offering to meet President Lungu on the matter, he was never given an opportunity.
“The promotion of Margaret Mwanakatwe as Finance Minister has not gone well with many economic watchers, analysts and advisors on Zambia. Following my interview with Bloomberg where I indicated some level of optimism, I was swamped with international calls,” Kanyama revealed.
“Two of the fund management advisors made it very clear to me, ‘Chibamba, you seem to be the only one optimistic about the appointment of Mwanakatwe. We don’t know her, and she is little known despite having worked for a global institution and served as Minister of Commerce’.”
He stated that Mutati was credited for introducing legal reforms on debt contraction.
“Mr Mutati is now out of the Ministry of Finance; this [is] happening when the IMF discussions are reaching a dead end owing to debt sustainability problems. However, according to international assessments, the economy is taking shape: economic growth at a reasonable level of 3.3 percent year on year; inflation around 6.2 percent, government hit its targets for the 2017 budget, the deficit at around 6.8 per cent of GDP better than projected (7.5 per cent), the debt position as a ratio of GDP reduced from 60 to 56 percent; the Zambia Revenue Authority beating the target by over K1 billion as we closed the year, and Moody giving a stable rating early in 2018,”
“Mutati is also credited for introducing Legal reforms (Loans Guarantees; Planning and Budget; Public Finance Management, Procurement Act) that would see parliament in 2018 decide on debt contraction procedures. Not sure now how this will be handled. International watchers on the Zambian economy shared apprehensions early this year of what would happen if Mutati was fired. They concluded, ‘That would imply a complete takeover of the current process and an erosion of economic institutions.’”
He has, nevertheless, continued to express his personal optimism about Mwanakatwe’s ability to perform.
Kanyama feels Mwanakatwe is more accepted in Cabinet than Mutati, making it easier for her to win policy arguments.
“…I am still optimistic she will succeed purely on the back of my two assumptions: She is much more accepted in the Cabinet ranks than Mutati was. It means objections to fiscal compromises will be taken in good context. In other words, she has more authority within the ranks to say ‘no’ to unplanned spending than her predecessor had,” Kanyama stated.
“She is an accountant and a banker who is expected to apply maximum due diligence and ethical leadership in the execution of her duties. Being a banker provides her the best leverage to negotiate financial deals with expected acumen. She should, however, work extremely hard to restore the decline in confidence following the removal of Mutati as Finance Minister. The court case about her election and uncertainty around it will play large among investors, and some are already unsettled.”
He, however, doubted if Mwanakatwe would manage to bring back the IMF team for negotiations after its recent backing out.
Kanyama urged the government to immediately give a firm decision on its future engagement with the IMF.
“If she can bring the IMF back to the table, which is very unlikely as things stand, international investors will rate her highly. It is more a question of whether she has the appetite for an IMF program than what the IMF has just said about the unsustainability of Zambia’s debts,” stated Kanyama. “For me, a firm decision defining the next steps on the IMF programme must be made in the next few days so that we end all speculations around it as this is damaging the credit rating of the country.”