The Multinational Monitor


G L O B A L   S I G H T I N G S

Zambia Gasps Under IMF Pressure

Faced with a foreign exchange crisis, Zambia is looking once again for assistance from the International Monetary Fund (IMF). To receive a requested loan of U.S. $637 million, the government of Kenneth Kaunda has imposed IMF-suggested "austerity measures" which will cause hardship - and most likely more protest - in this southern African country.

As a result of poor yields from its copper industry and maize crop, Zambia has run into foreign exchange problems: the nation currently has a foreign debt of U.S. $1.8 billion and its foreign exchange reserves are dwindling rapidly.

The IMF offers a way out of the crisis, but only if Zambia passes the Fund's test of "creditworthiness." Part of the test requires a country to cut back on government expenditures, including consumer subsidies.

Kaunda has begun to take these steps, phasing out subsidies on maize. As a result, the price of maize has gone up 30-50 percent over the past few months.

Kaunda's economic policies have not been popular, particularly with the Zambian Congress of Trade Unions. Partially in reaction to this criticism, Kaunda dropped 17 top officials of the trade union from Zambia's ruling party in early January. Their dismissal led to strikes which shut down the copper industry for a week .

The IMF appears to recognize the connections between its economic prescription, crunching pressures on the poor, and popular protest, but seems to see Fund policies as the only solution possible. "Any time prices rise for such a basic commodity as maize," says Saul Rothman, the IMF's Zambian officer, "there's going to be some social unrest. But, he added, "when you have underpriced goods, you have a huge budget deficit. To cut back on that deficit, you have to raise prices."

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