By LusakaTimes
Former Finance minister Ng’andu Magande has warned that Zambia risks falling back into the Highly Indebted Poor Countries (HIPC) bracket if the government does not reduce on its rate of borrowing.
Mr. Magande said he was worried with the fact that most of the borrowings that government had been signing was meant for projects which had no direct loan repayment benefits.
He said government needed to borrow with the view to putting the money in productive investments so that it accumulates finances needed for servicing the loans.
“From what I understand, we are borrowing for roads, and the roads really don’t have a kind of direct repayment benefit. It is the people that use the roads that make the money like the mining companies.
They are making the money themselves and taking it away because we do not have toll gates,” said Mr. Magande. He said the financial space left as a result of the US$7 billion debt cancellation in 2005 should not encourage government to borrow for no productive ventures.
“ In the shortest possible time we will end up being in the Highly Indebted Poor Countries (HIPC) bracket. Already we are saying that the debt for Zambia is already US$4 billion, now imagine that we just had debt forgiveness of about US$7 billion by the international community only a few years.”
“I would have no quarrel if we were borrowing money for construction of a dam for irrigation or borrowing the money for purposes of lending it to the farmers so that we grow crops and export and earn money,” he
said.
Mr. Magande cited the US$200 million loan from Exim Bank of China for the Mongu – Kalabo road as one which will need to be serviced by other productive government investments.
“We might have this beautiful Mongu – Kalabo road worth US$200 million but if nothing is being moved or produced on that road, then the money to pay back that loan has to come from elsewhere, and where is the government going to get the money?” he wondered.
Tell them. They have failed to get windfall tax on the high copper prices from the mines. They instead are busy borrowing. Foo..lish MMD Govt, run by MMD Movement for mad dogs.
FANTASTIC MAGANDE.
This is what we having been telling this Government. They should borrow and invest in productive sectors/industries not MOBILE HOSPITALS.
The concept of borrowing is welcome but only to the extent that the borrower is able to service the debt timely and at low cost
As a former Minister of Finance, would it not be ok for Mr Magande to pass such concerns to his successor privately and not through the public domain. The other day i heard Dr Musokotwane react badly to such public comments from Mr Magande.
MMD govt at its best; all these projects they have been shouting about are from borrowed money, creating an impression that the govt is working. You are cheated and you will vote for them.
Hon. Magande: Just prepare to be told off by your successor, the two of you seem to be fighting all the time. The other day the incumbent was boasting of how he worked at BOZ, Ministry of Finance etc.I am only glad that you have always not responded to his challenges, a sign of humility.
# 3:Dr. Musokotwane is the one who has refused to be advised. He thinks he’s the best person than his successor.
YES borrowing for political gain. but who care anyway..these guys lacks foresight. who are they pleasing…….it is a joke.
Other Nations are cutting back govt expenditures especially that of consumption, also ensuring that they reduce budget deficit and investing in INNOVATION and building the manufacturing sector to drive the economy forward. what are we doing–Nyama soya economy driven by commodity prices…..and borrowed money———–hahahahahahah!!!!! MUZADABWA
Much as I will not like Zambia to be more debts than it is able to pay,there is nothing wrong in borrowing.Western govts built their infrastructure on borrowed money.Mr.Magande has not said what the Debt:GDP ratio was when we had $7 billion external debt.Currently,if the external debt is between 10-20%,its fine.If I can remember well,Dr.Musokotwane said the external debt is somewhere at 14% and therefore we can borrow and build the much needed infrastructure.
Let them Gov borrow will pay back using PAYEE and VAT.
YOUR SENTIMENTS BWANA HIPC IS TIMELY INDEED. IT APPEARS RB IS SET TO RECLAIM POWER AT ALL COST. HE HAS NO FEELINGS FOR THIS COUNTRY AT ALL.
wHEN i BECAME PRESIDENT i WILL BORROW MONEY AND PUT IT IN MPONGWE RELATED PROJECTS THROUGHTOUT THE NATION,grow cash crops and not subsidy MAIZE , export and earn foreign cash!!
i WILL ALSO PUT MONEY INTO ENERGY SECTOR SO THAT I CAN PRODUCE MORE AND SATISFY THE DEMAND IN CENTRAL AFRICA AND SOUTHERN AFRICA.
Look at dollar and inflation rate. Just give kudos
this is why we have been advocating for modern managers in office………21st century managers who can run the Govt like a business. Managers who will introduce performance appraisals on the Ministries
Govt that will give performance related contracts to the would be ministers and their minions.
we need result oriented managers who will selflesly serve this nation with dignity and honor
Yup, that’s all the RB government does; borrowing from all over the shop on their trips.
#1 Mpangula Mputyu, please the windfall tax issue is dead and buried. Don’t be dull, read Mr Sata’s letter to His Excellency President Banda on the subject. He literally cried for the reduction of mining taxes for fear that high taxes Qoute “…may negatively affect employment opportunities in my strongholds on the Copperbelt…” end of Quote.
#8 Sharp shooter, well spoken indeed. I can only add that the problem with the $7billion debt which was dismantled under HIPC was that a huge chunk of the borrowed money went into subsidising consumption, exactly the same policy of “more money in your pockets” which a certain party wants to introduce. Now the country is borrowing for infratsurcture to boost production and productivity in the country. Either Magande is dull, or does not understand development economics, or is just being mischievious, or playing to the gallery, or most likely simply politicking as usual.
Mr Magande, I’ve alot of respect for you but I beg to differ. Indeed we have to watch our expenditure vs revenue sources, but certain vulnerable sectors require intensive investment without a cost benefit analysis! eg agriculture, basic healthcare and education. The schools, clinics and hispitals that are being built in rural Zambia may not have the ability to pay for themselves but are a critical long term social investment. The Mongu-Kalabo road may not pay for itself but it will ease economic activity (rice farmers, timber, mineral exploration) in a province all past presidents have!
…..in a province all past presidents have neglected! What’s the point in having budget surpluses when the majority of our brethren in rural and peri-urban Zambia have no access to basic infrastructure. It’s not like we’re borrowing for careless consumption; we’re investing in social infrastructure for future generations.
Sharp Shooter, H.H. Sata and Big Pipe – Very good comments, it seems most bloggers here are as dull as Magande – you mean our former Minister of Finance does not understand the economic benefits of a good road? What is the first thing that you should do when opening up an area for investment? Mr Magande was better off advising on Toll Gates at all border posts.
#19 Adviser: Strong point. You begin with road infrastructure. I don’t support the government on a lot of issues but on this one I think we are half a century away from where we need to be. One of the areas society is losing wealth is in wear and tear of vehicles most of which are transporting goods across the nation on very bad roads. This is not talking of how much time lost to negotiating potholes on many of them.
We can balance road construction with other investment in productive resources and come out ahead. Simple and straight forward.
Yes Musokotwane be like Magande who got a loan to get TATA cars for the police, poured billions into a fat desk lawyers pockets to fight a crime he and his minnows had no capacity, waived airport fees without guidance and so please learn from him….
No. 9 Mad – Life, iwe that will cause inflation as VAT and Taxes rise, prices will also rise! Magande’s argument is, say you borrow money from the bank and if you use it to buy food, where or how are you going to repay the bank? Simple economics you “idi yot!” Anyway, you are have a mad life!
This man mesmerises me. So these projects are no longer Mwanawasa and his initiative? Secondly no development should occur in the rural areas and villages because there is no economic benefit and villagers dont pay taxes. There are projects that are there for profit and others as a service to the people.
When one goes to the bank to ask for a loan,the first thing the bank will ask is proof of income.If you cant prove that you are going to service the loan then you dont qualify to be givem a loan.simple
Zambia failed to pay the $7billion debt,it had to be written off,why? because we didnt have the means to pay it back,otherwise we wouldnt have pleaded to get it written off.5yrs down the line we are $4billion in debt already.Can you wise people above tell us just how we are going to repay this debt
Sharp Shooter; there is everything wrong in borrowing,doesnt matter how you borrow,just coz the wetsren world borrowed doesnt mean we can also borrow,they didnt plead for their debt to be written off did they,,they paid back what they borrowed,we didnt thats what makes borrowing bad for us
Will the Mongu Kalabo road not open up the trade route to fast developing Angola? Would that not be of an economic benefit?
borrowing for mobil hospitals is madness. mmd govt reduce on borrowing especially this year that they want to please the voters,rupiah is on rampage borrowing.
Smoothcriminal
I have every problem with borrowing to consume like the way the $7 billion was accumulated.If we had not consumed the $7 billion but rather invested in infrastructure and economic reforms to spur economic growth and development ,we would have paid back the money.Problem was, we ate and therefore we had to plead to be forgiven cos we did have the means.Now,a quick look at work GDP:Debt ration shows that the the govt can borrow and invest in much needed critical infrastructure in the country.
But this not to say the govt should borrow excessively beyond what we are bale to pay and I believe Dr.Musokotwane is not that stupid to do that given our debt history.
#28
LT whats wrong,I meant: not that s.t.u.p.i.d
MMD- eastern province 70%. Central 38%. luapula 42%western 28%N/western 36% CB18%southern 12% lusaka 14% northern 43%=33%
PF-CB 40%. Northern 48% luapula 45%. Lusaka 40% central %18 sothern 4%,western 3% N/western 4% esatern 11% =25%
UNPD-Northwest 60% Southern 80% central 50% lusaka 42% western 40% luapula 3% northern 4% eastern 12% CB 28%=34 %
Magande keep quiet. There are better economists in govt than you. Rubbish!
Sharo shooter
Whats GDP got to do with borrowing,how would we have paid back the 7billion,,,im really struggling to get your view point,sorry to say,but im finding it difficult to understand you.can you try not to bring in GDP in this for christ sake
Sharp Shooter
sorry meant to say Sharp Shooter in my comment,apologies,no malice intended, recovering from friday night! for some reason keyboard seems not to be user friendly this morning
Smoothcriminal
The GDP of a country is an important indicator to ascertain the ability of a country to pay back the loans cos GDP is a flow(the amount of goods and services produced say in a year) that translates into income that will in turn used to repay the debts.Thus,having a reasonable GDP:debt ratio is an opportunity for the country to borrow and invest in infrastructure that in turn will increase growth.
Coming to the $7 billion.We were unable to pay back that money cos we consumed instead of investing hence we did not have the means to pay back.Infact that debt was more than our GDP as a country.Now how can an economy less than the debt service it? That’s why we had to beg of frogives and the current minister is aware of that.
#34
Meant: we had to beg for forgiveness..
The truth is that, our Government as failed!!… I don’t know where to start from or the words that I can use to express my feelings… I feel very bad! with the way things are going in this country. Where is the respect of our late president Mwanawasa? He tried all he can to free Zambia from Nkongole and which he did… why can’t we keep on with what he started! The only problem i see with this Government is that, people in front of us don’t have a heart for Others or the people of ZAMBIA… which Mwanawasa had!! But please… know that KALULU achenjela umukumo!!! CAREFUL IS THE WORD!!!!!…
magande has said what is reasonable in a long time with small contraditions. he say ok to building a dam from loan and no to building a road from loan. dam or road there is no difference both are tools for development. the lending to farmers is good provided its not gov dirrectly lending they can use a preferred bank for example
# 34 sharp shooter that well simplified explanation. i am impressed with augments on this particular blog.
People like him should be in Govt in any shape or form
My only observation on this issue is that those of us justifying the accumulation of debt on the basis of debt as a proportion of GDP, must break down the GDP figures and see what the contribution of of the various economic sectors is. Mining remains the key to improved GDP figures, and changes in the copper prices will affect GDP figures. My point being Magande is right in that a fall in copper prices will adversely affect our ability to service the loans in the long term. In particular, we should take into account the world economic outlook which is not bright at the moment (apart from China).