President Hakainde Hichilema today, 27 September, announced the return of Denny Kalyalya as governor of the Bank of Zambia (BoZ) with immediate effect. The move puts the BoZ in a safe pair of hands and bodes particularly well for relations with the International Monetary Fund (IMF). The Fund will conduct a technical visit this week ahead of a planned IMF deal, the prospects for which have improved infinitely on the back of Hichilema’s landslide election victory in August.
While the appointment still needs to be ratified by parliament, the move will be particularly well-received by the IMF, with whom Kalyalya had entertained a good relationship and which was unusually outspoken in its criticism of his sudden removal by ex-president Edgar Lungu last August. His replacement, Christopher Mvunga, was widely seen as too inexperienced for the job and resigned quickly following Hichilema’s landmark electoral victory. Under the Lungu administration, Kalyalya was widely credited for holding the fort at the BoZ and protecting the central bank’s credibility under increasingly adverse macro and fiscal circumstances.
Setting things right at the BoZ will be another positive signal in a string of promising signals coming out of Hichilema’s new administration. Last week, Hichilema completed a widely publicized and successful trip to the UN General Assembly, which included meetings with the Biden administration, IMF, and World Bank at the highest levels.
Minister of Finance Situmbeko Musokotwane described talks in Washington DC last week with the Director of the IMF’s Africa Department, Abebe Selassie, and IMF Mission Chief in Zambia Allison Holland as “very progressive.” The dispatch of an IMF technical staff team to Lusaka this week – from 27 September until 1 October – signals how quickly both sides intend to move. It remains to be seen whether any sticking points emerge around key policies and specific reform measures as the new administration works to unearth Zambia’s true debt burden, address the sovereign debt crisis and bolster economic recovery prospects. The visit will undoubtedly scrutinize a Budget Policy Concept Paper on the 2022 national budget and medium-term expenditure framework, which the cabinet recently approved.
For now, the administration appears ready to adopt a whatever-it-takes approach to clinching an IMF deal. However, recent economic trends – including copper prices and Special Drawing Rights (SDR) inflows – may also contribute to a slightly improved macro picture. With the budget to be presented around late October, hopes are high that Zambia will make relatively steady progress towards an IMF deal.