Answer to Question #281948 in Political Science for Comfort

Question

On 3rd December, 2021, the New Dawn Government and IMF mission to Zambia reached a Staff-Level Agreement on a programme under the IMF's Extended Credit Facility (ECF) that envisages provision of financial support of $1.4bn over the next three (3) years.

what implications will such an agreement have on the general economic outlook of Zambia?

To what extent do you approve or disapprove such an agreement? [15 marks]

Answer 1

When a country borrows money from the IMF, it commits to adjust its economic policies in order to address the problems that prompted it to seek help in the first place. These policy adjustments are IMF loan terms that ensure the country's ability to repay the IMF. This conditionality framework is designed to promote national ownership of strong and effective policies.

As a result, a deal like this will have far-reaching implications for Zambia's long-term prospects. Because of the multiple economic measures that must be introduced or reorganized as a result of IMF conditions, this is the case. This includes measures such as the elimination of price controls, the elimination of subsidies, an increase in taxes, and the broadening of the tax base, including an increase in fuel and other levies, all of which are aimed at stabilizing the country and boosting economic growth and debt repayment.

I endorse the agreement because it will improve the nation's long-term economic picture, resulting in increased stability and tremendous economic growth. The deal has the ability to save the country from bankruptcy due to tremendous debt. By sticking to the measures that have been established, this agreement will help the country to emerge from its current financial crisis and become economically stronger.