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Thursday, 29 October 2009

IMF - Zambia Watch (October 2009)

Statement at the Conclusion of an IMF Staff Mission to Zambia
Press Release No. 09/373
October 28, 2009

An International Monetary Fund (IMF) mission visited Lusaka October 15–28 to conduct the discussions for the 2009 Article IV consultation1 and for the third review of Zambia’s Poverty Reduction and Growth Facility (PRGF) with the IMF. The mission met with the Minister of Finance and National Planning, Hon. Situmbeko Musokotwane; Governor of the Bank of Zambia, Dr. Caleb Fundanga; other senior officials; and representatives of the business community, labor unions, civil society, and Zambia’s cooperating partners. The mission is grateful to the authorities for the fruitful discussions and warm hospitality over the last two weeks.

At the conclusion of the mission in Lusaka today, Mr. George Tsibouris, mission chief for Zambia, released the following statement:

“I am pleased to say that we have reached ad referendum understandings on macroeconomic and structural policies for 2010 that would pave the way for the completion of the third review under Zambia’s PRGF arrangement with the IMF.

“Against the background of the global economic crisis, the Zambian economy has shown considerable resilience, and economic growth is now expected to exceed 5 percent in 2009. Mining and agriculture have shown strong gains in output; nonetheless, there have been job losses in mining and some financial difficulties in the agricultural sector. Inflation is moderating, assisted by a softening of food prices and a limited reversal of the earlier depreciation of the Kwacha; the revised inflation target of 12 percent by end-2009 is well within reach. The external position has also strengthened, both because of the earlier-than-expected recovery in copper prices and the exchange rate-related compression of imports. Zambia’s reserve position at about US$1.7 billion is now stronger than it has been in almost four decades, thanks in part to the recent Special Drawing Rights (SDR) allocation of US$629 million from the IMF.

“While the overall performance of the economy has held up well, government revenue collections, particularly of import-related taxes, have fallen short of expectations. In order to preserve targets for domestically-financed capital spending, the government has accessed some financing from the Bank of Zambia. There have also been delays in the disbursement of donor aid, both budget and sector support, which has further hampered government’s ability to meet spending targets. The government is to be commended for its handling of fiscal policy in 2009.

“The economic program for 2010 is premised on a budget, now being discussed in Parliament, that maintains an appropriately supportive stance in a resource-constrained environment. Monetary policy aims at containing inflation while providing adequate credit for the private sector. The outlook is for some pick up in economic growth and a further easing of inflation into single digits by the end of the year. The external position is expected to remain strong.

“Looking ahead, Zambia faces a number of challenges that need to be addressed if robust economic growth is to be sustained over the medium term. Key among these is the need to increase fiscal space for infrastructure and social sector spending to support the diversification of the economy and poverty reduction. This will require both the mobilization of additional domestic resources by reversing the downward trend in tax revenue collections seen in recent years and, equally importantly, by ensuring that public spending is cost-effective. Particular attention needs to be paid to the public sector wage bill, which currently consumes more than one half of domestically-generated resources, and could end up displacing other high priority needs.

“The IMF Executive Board is expected to discuss the third review under the PRGF arrangement and the 2009 Article IV consultation by late-December 2009.”

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.

1 comment:

  1. From the 2008 anual report, Kansanshi Mine:

    Total copper production: 215,314 tonnes (cathodes, not ore)
    Cash cost of production per pound: $1.16
    Sold gold (ounces): 62,064
    Average copper price per pound: $3.61 (LME, first 9 months of the year)
    Estimated average profit per pound (copper price first 9 months of 2008 minus KCM's listed cost per pound): $2.45
    Profit: $1162 million (gold not included)
    Revenues from Copper: $1713 million
    Royalty tax at 3.0% of turnover: $51 million

    (1 tonne = 1000 kilo, 1 pound (lbs) = 0.4536 kilos,
    215,314 tonnes (x 1000 / 0.4536) = 474,678,130 pounds,
    x $2.45 profit per pound = $1162 million in profits.)

    1) Copper prices first 9 months 2008

    2) First Quantum (Kansanshi Mine owner) annual report 2008

    What I am saying is that with a turnover of $1700 million in 2008, at a 3% royalty tax, they would be paying all of $50 million, not $8.9 million.

    Right now, they're being praised for complying with their taxes here:

    Zambia: RB Warns Tax Evaders


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