The World Bank says it supports the Patriotic Front (PF) government’s external borrowing provided the borrowed funds are invested in the economy.
Commenting on the decision by the PF government to increase the country’s external borrowing limit from 20 billion kwacha to 35 billion kwacha, World Bank country Director Kundhavi Kadiresan says Zambia still has enough space to borrow externally going by the debt sustainability point of view.
Dr. Kadiresan has told Qfm News in an interview that if the PF government is however going to spend the borrowed funds on projects such as road infrastructure development, it is important that government does financial and economic rates of returns.
She says this is in order to ensure that the borrowed money is spent on priority areas that bring value for the money.
Dr. Kadiresan adds that this is also why the PF government should now start looking at improving the country’s public investment management so that the borrowed money is spent more efficiently.
The decision by the PF government to increase Zambia’s external borrowing has attracted a lot criticism from both the opposition and some civil society organizations who fear that the country might fall into another debt trap.
Of course they would be! Lending institutions get disappointed when a loan is liquidated. Anything new?
It’s a no-brainer mudala. Where has anyone ever heard of a bank discouraging getting loans? They actually even have penalty clauses if you pay a lona back too early.
Yes of course they would be okay with you borrowing, that’s how they make money!
ce n’est rien (they will say its ok it’s nothing) What does your management degree education and skills tell Mr President?
So why is the Chinese firm having to abandon work and borrow money else where if the funds being borrowed by the state are mean’t to be used to fund Sata’s populist road building agenda?
Regarding the world bank, they would never stop giving out loans to poor countries like Zambia because they dictate the collossal loan interests rates. They make more money to fund the developed world’s projects on the back of the poor countries paying back more.So the world bank ‘s support for PF ‘s borrowing is nothing to be happy about.
Awesome !!!
Saulosi get a life.
Investment in infrastructure like roads is key to stimulating the economy.This will in the long run provide people with affordable transport options and would also dramatically ease congestion.In a nutshell roads are the lifeblood that can keep our economy going,they create jobs too(construction jobs for example) and help get products to the markets easily.
Saulosi, you and I know that this will not happen, this money will end up in some pocket or still worse some foundation. what we need right now is a governing system that will work for Zambian now and generations to come. A system that is not corrupt, a system that is accountable, ruling parties in past have borrowed in the name of developing infrastructure that we have never seen. im tired of these lies, and ready to fight for a better Zambia for all.
Saulosi you have summed it up for me.Dude you are intelligent!
Saulosi and your groupie Zambiano, if you guys are still in your twenties or early thirties, then I understand. People I would have an issue with are those who were there during UNIP like I was and still support this nonsense.
@ Wako niwako,
I couldnt help it but had to respond, In short you are saying Zambia should remain underdeveloped so long as someone is pocketing some of that money?And what Governing systems are you talking about which will all of a sudden revamp the Economy? Why not then do what every government is doing Supper power or not, borrowing to shape up their economies? As far as tackling the corrupt government and other issues are concerned in ensuring a smooth sail, I think you have answered yourself in the later stage of your post.
Good points you have there Saulosi and Cindy you guys makes me to enjoy Lusaka times including that Crazy ndobo.Keep it up.
Cindy, we have never stopped borrowing. The thing is we used to borrow amounts that we could sustain. Even in banks when you go try get a loan, say, through an MOU with your employers and the bank, the bank will limit your loan based on your net pay. In short, you need to borrow what you are able to service. What bene Sata and crew are doing is borrowing beyond our limit, like in the old days. Somehow, someone informed them that using the same strategy of old that got us into BIG problems, will turn out different this time around. Greece went down the same road and then what happened to it. They went with begging bowls to Angela Merkel and Germany was now able to dictate certain aspects of Greece’s policies in order to be bailed out. This issue requires deep thought and objectivity.
@cindy what im saying is that, trying to fill water in a bucket full of holes is a waste of time. one, will not achieve that goal unless the holes are mended.
Thanks Cindy.Well said.
Nice discussion here.Saulosi you set the pace.
@Dudelove
You are being realistic on this issue. Its either the PF zealots were born towards the end of UNIP era or are simply under a tight grip of amnesia.
Seriously Zambia needs younger leaders who are in touch with the modern trends of running a country. These old goons will never equal the late Mwanawasa. Mwanawasa was far younger than Sata by a decade and I think thats why he performed better.
You say,roads are a life blood, i suppose the phrase was taken as an analogy to the circulatory system in the body. so lets see how the body works. The main goal of this system is the transfer of gases i.e oxygen,carbon dioxide (hence life) to the different parts of the body as well as nutrient i.e amino acids and electrolytes ( energy) and other things like blood cells etc. But what is zambia transporting to give the nation life? 56.7% of our GDP is from agriculture and industry while the remaining 43.3 is from services. so we see that a fairly large portion of our economy is dependent on agriculture and industry. So why not focus our roads in the farming belt as well as where our industry thrives and concentrate more on the creation of new industry (nutrients)
so that the necessity of roads later on is in the new industrial areas is justified with increased productions from these plants. You build roads based on research and not because people in chiawa area are complaining. yes they would need a tarred road as they are citizens of this country and should enjoy the same benefits as everyone else does, but research to see, what is in chiawa area that we could use to grow our country,is it diamonds, aluminium, water bodies, salt etc. This would make one of the conditions to make a road to that area,because there is substantial benefit from that area in a long term as well as short term. We are a developing nation and we need to prioritize. The luxury of roads everywhere would come later. we need to focus on industry and R&D/ education.
A perfectly health human being with a good circulatory system can go 3-4 days without water and 30-40 days, so they say, without food after which it dies. The body needs food and water (industry, production of goods) to survive and grow, regenerate damaged tissues, cells etc. But if your leg is dying,has cancer, it can be cut off before it cripples or kills the whole body. These are medical facts and since all known knowledge is based on the heavens (astrology) and earth (man), we can take counsel from this and do the right thing with our economy,our country. We can sacrifice the circulatory system to Chiawa area if it is crippling us with maintaining roads there that do not add value to our economy. As they say, it would be time to pull the plug and use the resources elsewhere.
It awaits even more, the debt trap!! Go on borrow and still see how you will fail.
Very true, what you are saying.
these imperialists never stop to amaze me. they enjoy when a country is debt ridden so that they can control its economic destiny in the name of HIPC. PF open your eyes and see that your children will suffer the consequences of this so called over borrowing. you have no capacity to create wealth to pay back these loans you are getting as some of you are about to demise
@Bwalya chiselema
You are absolutely right! Let those who have brains learn from your free invaluable data.
Abash borrowing, ALUTA CONTINUA A PEOPLES DRIVEN CONSTITUTION, VIVA 50+ 1
It defies logic actually. The time we were trapped by debt by Alexander Chikwanda and bene KK and they failed lamentably to service these debts driving us into extreme poverty and a very high cost of living, it took educated technocrats in the MMD, granted they stole, to get these debts were written off. Chikwanda is back, same financial policies that trapped us which are, in short, do not think, just borrow. My question is, what has changed now? Whether people admit it or not, PF is full of pipo who fail to think. They may be intelligent individually but since their leader is of an extreme humble education, they have no choice but to keep quiet, toll the line and watch the country burn.
@Dudelove
Spot on! Bauze in case they have forgotten what caused the down fall of KK.
PF zealots are forgetting that a time will come when PF will fail to service these debts and these imperialists will then tinker with the political levers and advocate for PF’s removal in the hope that next the government will honour debt repayments. I am no historian but I dont forget what we went through in KK era as result of over borrowing and failing to repay on time.
Debt is the price you pay for enslavement. Very soon PF will start dancing to the unpleasant IMF and world bank ‘s tune.
Turning to China will not help much either. Just look at Zimbabwe today.They thought China will help them forget the IMF and World bank ,they hit a snag big time.
We should learn from mistakes…
I wouldn’t mind if 50% these huge sums of money being borrowed were ploughed into kick starting manufacturing industry so that the balance of payment is maintained at a neutral level or better to maintain BPPP.
These roads will be build fine, then where will the government find the money to maintain them and service the mounting debt at the same time.
Most us opposing the PF ‘s strategy are not completely against government’s construction projects. But what we are merely suggesting is that the government should limit their borrowing and spend the money wisely. Unfortunately that s not what the government seems to be doing. Instead they are using a huge chunk of the money borrowed to fund unnecessary bye elections and dodgy procurement processes aimed at enriching them themselves.
Off course! You think they can say NO to more money in their pockets?
Is there even one person in PF who knows how to compute the economic rate of returns late alone arrive at Value for Money? Even their most intelligent Economist (Miles) is a dunderhead. For them development is just to construct and construct and construct
Spot on world bank ! The PF will forever remain a hard working government.Twaikonda iyi yeve.
I wish World Bank will also underwrite interest and repayment of the principal, if not, be ready to tighten the belt as the weight of more coins in the pocket will leave you naked.
I usually do not comment on these issues but I’m now compelled because of your lack of analysis. First it must be observed that Zambia never stopped to borrow even after achieving the HIPC conditions. However logic demands that you do not go back to the same methods that put you in terrible problems in the first place. Unfortunately Mr. Chikwanda and Mr. Sata know only one way of doing things. They destroyed Kaunda using such methods and now they are applying them on themselves. These roads will soon have potholes and they will need rehabilitation. Where is this PF of yours going to get the money for that. Infact if you read carefully, the World Bank is actually cautioning the Government to start seeing the economic value of all these roads they are constructing. Please think!
Its not running into debt that gets you into trouble, its running into your creditors.Watch our Zed coz you’re headed right into their arms and it won’t be pretty when they start liquidating Mpika and its mad man.
Fellows,
In as much as we know that any money lender will applaude at the rise in borrowing, we should also be realistic in the manner in which we respond to certain issues. With all due respect to your contributions on this sensitive issue, it is only inline that normal Government will do the calculations and conclude that, the only way to development is ofcourse having more somewhere, so if you dont have it anywhere, then you look for it somewhere.
Surely you dont think at this stage Zambia has any money of it’s own to build up a strong economy that would support every corner stone of it’s borders do you? Talk is cheap fellows, lets agree on setting a limit on borrowing, make concreet calculations for what is needed for the next 10 to 15 years.
I think on such developmental matters we need to rise above partizanship and debate constructively, offer suggestions rather than snap out of frastrantions. Government discuss these issues in depth over which we might only know a tiny bit or the conclusion only.
Good point right there Cindy.Awe wafunya data.I couldn’t have said it any better myself.Keep it up mama !!!
cindy your ideas are good, but it will not happen, this is Zambia you are talking about , were winners take all, this is a country were people in power hide and sell ARVs meant for its people to another country, for the love of money. they do not care if you live or die as long as there is money in there pockets you better wake up, which Zambia do you belong to anyway, you sound rather naïve about what’s happening in zambia
Cindy, unfortunately the trend of blunders with regards policy enactment and implementation and the number of u-turns and contradictions on a lot of pertinent matters in this government leaves little confidence in a lot of us with regards their ability to deal with such complex matters and unsustainable debt. These discussions you speak of should have also been there under the same Chikwanda all those years back. Do you really expect a person who presided over an economy in the sixties and has been out of circulation for almost thirty years can come back and offer anything new in tandem with the current global demands? I would have been more comfortable if this level of borrowing was under a different, untried finance minister.
@ Love games,
Am not naive, infact I blame all of you Zambians sitting back and not doing anything to change the situation for the batter! It sends shock wave to my spine each time I read such comments of how the right thing shouldnt be done for fear of monnies ending up in the wrong hands. It is same as saying, “if I cant have him no one can”!
Since you all seem to know what is happening, why not fight hard against corruption? Why just sit back and say “this is Zambia” dont let me believe those bloggers who insist on saying zambians are docile. One thing I know is that Zambians always criticise alot and offer no solutions!
@ dude love,
Responding to your ealier post above, the financial climate is one unpredictable paltform where you cant compare the amount you borrowed last year to this year or the year next. Infact it evolves almost every second such that if you miss any payments of your last loan, you incur twice as much. Life has changed drastically to the extent that projects of the last decade if never maintained are as good as dead. Therefore, rasing them up would require the amount twice as before, so when talking about the amounts borrowed, we also need to acess the magnitude of the projects fore hand, otherwise, we will be enacting shoddy works which will not only be White Elephants in our yards but also our death trap!
@ dude love,
If you are not comfortable with the current government in handling our economy favourably, which is normal, I think it is just right to offer suggestions of how to handle the problem. You could also wait for the next elections so you can fight for the right person you think will perform wonders for our country, atleast thats what we all want to see. Besides you never know maybe someone in the smae government may share your ideas and would bring them up to be implemented.The waves are changing he might have been around for so long but maybe surounded by a different crop that could just convince him to handle matters of today in a different way.
By the way, bad seeds are always around the good ones, you may be surprised that even the new crops you so believe in could be bad.
Ok but Cindy is the most intelligent blogger on LT.She reminds of the former Nine Chale.
@cindy
You and most us here agree that borrowing is okay but over borrowing is what is a problem, more especially if the money being borrowed gets swallowed up by corrupt schemes which benefits the powers that be, while leaving the majority poor with tough living conditions as they shoulder most the debt burden.
Zambiano listen to dudelove it feels good to borrow but the repercussions are great, we already experienced those repercussions and no body wants to experience that again that’s why the opposition. you can’t compare disciplined western world to undisciplined 3rd world countries with so much corruption. government needs to be cautious and not be reckless it’s very easy for that small economy to collapse with so much debt
Surprised by this comment. Its clear that the low Debt/GDP ratio that Zambia has is not reflective of the structure of its economy. It makes absolutely no sense to have a Debt/GDP ratio of circa 35% (which is good) whilst having a fiscal deficit projected to be 8.5% to 9% (IMF and Fitch respective forecasts). A fiscal deficit that high is certainly worrisome. The only way to reconcile the two is to come to terms with the FACT that a large portion of Zambia’s GDP is generated by the informal sector which is for the most part not taxed. The problem with the economy is not that the mines are not taxed enough, its that the tax base is unfairly low because informal entrepreneurs and workers do not contribute their fair share.
With the fiscal deficit where it is at just below 10%, and the government planning to borrow more, its almost certain that if this trend continues for another 2 years the debt will be unsustainable and unmanageable. Particularly if the government continues to grow each successive budget by 20 to 30% as it has done over the last two years. The World Bank ought to advise caution and sobriety about this proposed increase in levels of debt. It ought to instead advise that inventive ways of including the informal sector into the tax base be thought up. Certainly well targeted debt usage is good, but building roads everywhere and anywhere without cost benefit analysis or a robust public investment management policy is wrong. I agree with the World bank about that.
AKA KANAMAYO KAYOFYA KA!
I sure our so called local economic experts who are against borrowing for infrastructure development now want to hide in shame. I am not a in love with the world bank and IMF but they are right on this one. Our economists are a let down because they can not even predict anything correct. They are good at discuss the aftermath(post-mortem like malukulas)
HAVE YOU NOTICED? WHEN @Thoughts STARTS TO ANALYSE DATA WITH FACTS AND FIGURES, DUNDER-HEADS LIKE CINDY, DUDELOVE AND THE LIKE KEEP QUIET. THEY STOP POSTING THEIR UNSUBSTANTIATED PARTISAN COMMENTS. LOL.
Chisenga, O wise one, you will note that Thoughts is putting flesh to my arguments. In short, he is detailing what some of us are saying with facts and figures and so, in your wisdom, you feel he is supporting this borrowing seeing you are a cadre, am I right?
@cindy, @ saulosi, and others…consider this:
It is one thing for Bill Gates or Richard Branson or Jobs to borrow $1bn for their business, and a completely different ball game for a Kamwala business man to borrow the same $1bn. I neeed not to tell you where each of these guys will put their money or how they will use their $1bn. Safe to say, the PF will definitely behave like the latter. We all know that PF can’t meaningfully utilize those borrowings. I rest my case.
@ me,
It’s the mind set and the environment at play here, we can debate all day long, it wont change a thing, Bill gates and all those you have mentioned there are as human as all of us, they started from Zero, Nul, Nada and made it to the top and so is most of the powerful European nations. Mind set mind set….. if I could know how to turn that knob on, I sure would do it in a split second, just look at the flow on this blog most of the times, we fight over issues that we hold the key answers to, no.. it’s not being African, being black and for sure its not magic, but mind set! Start when they are still toddlers, teach them the valuable importance of life, teach them how to handle finances whilst still young, show them how to fish and keep that fish fresh for tomorrow.
The key issue is fiscal sustainability: the ability of a government to pay off its debt in the future, essentially by shifting its current obligations onto future taxpayers. In other ways, borrowing money that your children will have to pay back is not necessarily a bad thing; it depends on whether you use it to improve the world they will live in. If not employed properly, you leave behind a generation of paupers..
CHILUBA BORROWED TO BUY DESIGN SHOES AND SUITS.
MY DAD, RB BORROWED FOR US AND OTHER
SPEND FREE OF OUR BROTHERS.
MY DAD AND MUM BORROWED SO HEAVILY TO
SEND ME TO SCHOOL AND NOT FOR FOOD ONLY.
HERE I AM, WITH A PhD.
WELL DONE GUYS. PLEASE FEEL PROUD AS YOU
TURN IN YOUR GRAVES.
THAT WAS BORROWED MONEY WELL SPENT.
@ CINDY
Most of Europe started from zero! Really! Which History did you read or study? When did you follow news on CNN?
Please appraise yourself with the MARSHALL PLAN (officially the European Recovery Program, ERP) was the American initiative to aid Europe, in which the United States gave economic support to help rebuild European economies after the end of World War II.
Also read about the American and UK economies dependency on (borrowed money from) China.
@LUAPULA PREMIER
No one is against borrowing as long it is sensibly done and the money borrowed is properly accounted for.
What worries most of us is the fact that RDA; an institution which handles borrowed billions is in state house and only three people are accountable for how the money borrowed is spent. This is very dangerous because the temptation for Sata, the chairman and the CEO to corruptly divert the money for personal use is incredibly high. Look at the way they are awarding contracts without following PPZ tendering procedures. There is something fishy about the way Sata chose to run RDA.
What I find even more intriguing is the the fact that PF government is recklessly using much of this borrowed money to increase their political influence through induced bye…
@LUAPULA PREMIER
More over it is just wrong for you to draw parallels with the western countries like the UK. These countries borrow and invest the money to prop up manufacturing industry along side infrastructure.
They have a rigorous parliamentary system which forces the government to account for every penny spent. The PM does not run important agencies like the way Sata runs RDA.
Unlike Sata and PF the UK government neither dig into the government coffers to fund party political activities nor use the borrowed money to increase their political influence. Their party activities are funded by donors and lobbyist.
@ luapula,
Sorry dear, I live with people whose family members testifies over how Europe was before the Toilets, when they could only use Buckets and throw everything out through the windows. They speak of how young girls could not be allowed to go to school because a womans duty was to get married,Just the other day we were discussing the issue of when the Law came into effect for a woman to inherit the property after her husbands death, to most of us it was schocking to learn that it’s just yesterday 1981, and mind you am the only Black girl from that bunch, even the indigenous didnt have a clue! The Europe I have come to know now was just a myth in those days. CNN does not even have a time to air what Europeans went through to get to today luckly for me I dont have to search further!
UPND Critics of this GRZ,
please read about the American and UK dependency on (borrowed money from) China today.
As we speak the UK premier is in China with close to 100 businessmen and women with beggars’ plates in their hands. USA will follow.
@ Cindy
Sorry, your opinion on borrowing will one day prove government critics wrong.
How about we save our blogs today, and then review them in 10 years time..on 10th anniversary.
Difference is that they are borrowing smartly and sustainably. Borrowing within their means and above all, not for consumption. Their future generations will not be yorked to poverty out of irresponsible borrowing. In any case why do you think the UK premier took a contingent of business leaders from the UK…..me took business leaders with him to China. Try telling that to PF
…it is important that government does financial and economic rates of returns……….
who is expected to do this and convince politicians of benefit of such economic models and assumptions which go with it? The current establishment they have taken the easy way out of using debt/GDP ratio, which is easy to understand, though it tells you less on your future ability to pay in the ever-changing world if you do not invest wisely.
Continuous borrowing yet Country is endowed with abundant mineral/natural resources, one major exporter of copper in entire world, fantastic tourism destination etc. All the resources required to drive Zambian economy forward are within our back-yard. Look at Botswana next door how they have managed their mineral wealth and yet Zambia has more to offer from God given natural resources.
The UN representative is within the same vein advising on putting in place clear cut investment management and economic return.
Keep on borrowing, but remember the loan sharks will call by your door step in not too distant future. It is amazing how easily people forget, Zambia was struggling with external debt from KK days until 2006 when the G8 granted $4 billion debt relief and other donors…
@ saulosi and @ Dudelove
Guys,
do you do any research before posting anything on this site? Or are you real duds?
When you go to the bank to borrow, its the bank (the lender) that will caution you, and not the hungry kids at home. Its the lender which assesses your business plan, ability to repay etc.
We continue to travel the world, so we feel that we are behind other countries like SA, Kenya, Botswana etc. Do you want us to continue walking about the streets of our towns with shoe brushes in our jackets just because of dirt or dust in our streets?
KK’s borrowing was consumer based, to appease the voter.
PF borrowing is for infrastructure and manpower resource development.
Please TRAVEL and try to be wiser and realistic like the World Bank (the lender)…
No president will ever much KK ‘s record on infrastructure.
Simple economics borrow to grow the economy when the economy grows infrastructure development will automaticlly be trigered and let not infra.devpment be a sole govt agenda but private sector based.eg spend the borrowed money on establishing gigantic farming blocks in every district the the private sector will start establishing plants to process the produces hence adding value and creating jobs.
For sure road construction is very important, but, just as the World Bank Lady put it, priotization of projects based on financial and econmic rates of returns is very important for sustainability but one wonders whether these projects are done in a systematic manner or are based on polical appeasement. Are politicians consaulting with technogrates on the long term economical benefits of these projects. Moreover, are we sure we cannot generate most of the monies locally; are we getting enough from our natural resources by effectively taxing the investors who are exploiting our god given resources. what ever we do, we should have it mind that Zambia belongs to us as well as future generations.
I’ll keep it very simple:
1. The world Bank is an American company (NOT a company of the “world”)
2. They are out to look for American interests
3. The US budget deficit is just under $1 trillion!
They have borrowed more than any other country on this planet, and the consequences for their economy have been severe. And yet, they are in the forefront of getting other countries to borrow from them so they can service their deficit. Zambians please do not be fooled by this. We do not need this much debt. If we just manage our resources properly then we will be ok!