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IMF REP’S OPEN TALK ON DEBT ANGERED GOVT …Baldini’s criticism on bad economy was unsettling to command, reveal sources

RECALLED International Monetary Fund resident representative Dr Alfredo Baldini’s open criticism on Zambia’s rising external debt angered government, sources have disclosed.

Dr Baldini has been recalled almost a year before the expiry of his tenure in Zambia, which was to come to an end in June, 2019.

The recall of a representative before the expiry of one’s tenure is not uncommon, economist Chibamba Kanyama has said, as some governments that are members of the Bretton Wood institution could make requests for a replacement “for strategic reasons”.

After the announcement of Dr Baldini’s departure, the Ministry of Finance issued a statement confirming the recall and reaffirmed the government’s commitment to continue negotiations for possible a bailout package from the IMF.

However, investors received an email purported to have originated from the Zambia IMF country office where Dr Baldini allegedly disclosed he would leave Zambia at end of August due to what he termed “suspension of programme negotiations”.

During this period, yields on the Eurobond plummeted to new levels as speculation emerged IMF would not be sending a resident representative to Zambia “any time soon”.

“Alfredo angered government for his open statements about the economy not doing well. The whole issue boiled on Alfredo insisting government was not doing enough to reduce the debt risk; that Zambia was riding high into debt with interest payments making it impossible for an IMF bail out through a programme. The programme discussions became extremely difficult because Alfredo kept insisting government data on all economic fundamentals, particularly the debt numbers, were not reconciling,” the sources have revealed. “…during the May Spring Meetings, government insisted that Alfredo be recalled for what they termed ‘incompetence’ but IMF countered incompetence would be injurious on one’s career.”

Following the Spring meetings, Dr Baldini is said to have taken long leave to the extent that Zambia failed to launch the Regional Economic Outlook.

“Rumour started circulating early August about Alfredo’s imminent departure, 10 months ahead of the conclusion of his tour of duty which is June/July 2019. On Thursday, August 23, Alfredo met a few members of the civil society to announce his departure. During the same evening, participants at the Economic Associaton of Zambia raised the issue to Ministry of Finance officials as to the implications of the imminent departure of a Res Rep who was central to the programme discussions,” said the sources.

Concern among investors also remains as to when a replacement to Baldini would be announced in view of the anticipated Article IV visit before end of year and what the implications would be without a proper handover.

“It is not unusual for a government to ask IMF to recall either a mission chief or a resident representative. This happens regularly in some countries and has happened in Zambia before. This is usually done for strategic reasons, either the authorities find it difficult to find common ground due to personality issues, attitude or inflexibility. Remember, Zambia is a member of the IMF and was recently represented on the IMF board, so, it has significant say on certain processes,” said Kanyama, whose earlier comments about Dr Baldini’s recall angered the PF that disputed it, despite the Ministry of Finance confirming so.

On whether or not a replacement can be made soon, the former IMF communications advisor said: “Resident Representatives are usually appointed for a period of three years. Usually, a few months before end of mission, if I recall correctly, the IMF will embark on a recruitment. I cannot delve into the detail because of confidentiality issues and this may usuallly take longer because it involved clearances just like we experience with diplomats. However, given the nature of this case, I am very sure the Minister of Finance Margaret Mwanakatwe is managing the consultations with the IMF. She actually confirmed in the statement and I am sure IMF may give consideration. I do not think this whole development has caught the Minister by surprise. There may have been closed door talks regarding the recall. Also remember that Zambia is due for Article IV discussions and she will definitely push for a replacement soon.”

What matters most at this stage is how government communicates and manages he transition, Kanyama said, adding that “it can be a little tricky given the current circumstances of external debt and anxiety among investors”.

“But like I have said on various fora, I have confidence government has competent technocrats to manage the process,” he said.

When asked about the likely impact on investors, Kanyama said: “I have had some calls already. It’s a mixed reaction, others think it’s the final nail to the end of programme discussions. One or two think that this may be an indication or signal government wants to restart the program discussions but with a different person.”

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