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IMF Urges reassessment of fuel Subsidies Impacting Zambia’s economy

By Felix katyetye

Eric Lautier, the International Monetary Fund’s Resident Representative for Zambia, highlighted the detrimental effects of fuel subsidies on the Zambian economy, emphasizing their disproportionate benefits to wealthier households.

In a statement issued by the Acting Chief Executive Officer Tendia Posiana said according to Lautier, IMF research underscores that the wealthiest 20 percent of households in Zambia reap six times more benefit from fuel subsidies than the poorest 20 percent.

“Subsidies, particularly on fuel, skew resource allocation in favor of the affluent, they incentivize higher consumption among larger firms and affluent individuals, exacerbating economic inequalities,” Lautier said.

Lautier also cautioned against the environmental toll of such subsidies, especially amid Zambia’s ongoing struggle with climate change-induced droughts.

“They are very detrimental to the climate,” he noted, underscoring the urgency of sustainable policy measures.

Highlighting the fiscal strain imposed by these subsidies, Lautier further pointed out their significant impact on budget sustainability.

“Allocating substantial portions of the budget to fuel subsidies restricts vital investments necessary for economic growth, job creation and social welfare improvements,” he said.

Addressing the complexities involved in subsidy removal, Lautier acknowledged the potential hardships for low-income households, necessitating well-calibrated support measures to mitigate adverse effects.

Looking ahead, Lautier announced IMF’s participation in the upcoming Economics Association of Zambia 2024 Economic Summit scheduled for July 25 to July 26 in Lusaka. The summit aims to strategize on economic resilience amidst Zambia’s current challenges.

The event’s theme, “Pioneering Zambia’s Sustainable Economic Transformation through Climate Change Adaptation and Sustainable Financing Mechanisms after Debt Restructuring,” underscores the nation’s commitment to sustainable development amidst evolving economic landscapes.

The summit, organized under the auspices of the Economics Association of Zambia, promises a platform for stakeholders to deliberate on pragmatic solutions crucial for Zambia’s economic future.

For further insights and updates, stakeholders are encouraged to engage actively in the discussions at the Ciela Resort in Chongwe District, Lusaka.


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