The Ministry of Finance has released a report clarifying the Auditor General report that revealed that the Ministry of Finance had failed to service loans amounting to over US $123 million which Government borrowed from Brazil, Iraq and China.
In a statemement released to the media today, The Ministry of Finance said that there were signed agreements with respective Governments on how to service owed to the three countries.
The Auditor General’s report on the accounts of the republic for the financial year ended December 31, 2012, found that loans from Brazil and Iraq were last serviced in 2001 and 1984, respectively.
The report further revealed that loans from China have never been serviced and interest has since accumulated to over $44 million
Below is the full statement from the Ministry of Finance
STATUS UPDATE ON THE EXTERNAL DEBT POSITION
Lusaka, 30th January, 2014. The Zambian Government is on course with all external debt obligations and both external and domestic debt levels remain below the international thresholds of 40% and 25%, respectively. The Government will also continue to be mindful of the need to maintain debt sustainability to safeguard macroeconomic stability.
The economic development programme of the Government is now in full gear but a lot of effort is expected from respective Ministries, Provinces and other Spending Agencies to ensure that planned programmes are executed in a timely manner. Consistent with ensuring the speedy implementation of development programs throughout the country, the Ministry of Finance will continue to ensure the compliance with high standards of resource governance.
Looking back to the end of 2013, preliminary estimates indicate that the total debt as a percentage of GDP stood at 28%. Of this, external debt stood at US $3.1 billion [approximately K17 billion] or 13.7% of GDP, whilst domestic debt stood at K17.6 billion or approximately 14% of GDP. Debt service (principal and interest payments) stood at K11 billion or 1.2% of GDP (and approximately 6% of domestic revenue). In this regard, external and domestic debt levels are below the international thresholds of 40% and 25%, respectively.
By compliance with the provisions of the Loans and Guarantees (Authorization) Act Cap 366 of the Laws of Zambia, all debt charges arising from loans contracted under the Act shall be charged on the general revenues of the Republic of Zambia. It should be noted that the Ministry provides for debt service in the national budget as constitutional obligations of Government.
Commenting on Zambia’s external debt, The Acting Republican President, who is substantively the Minister of Finance Alexander Chikwanda said the assertions by some sections of society over the last few days, creating an impression that the Government had defaulted on debt obligations to Brazil, Iraq and China, should be discarded as they are not based on empirical evidence.
[pullquote]The special bilateral arrangements entered into with Brazil, Iraq and China, allow for suspension of debt service payments during the period of bilateral negotiations – pending signing of debt relief agreements. The resultant debt payment arrears are what are referred to as ‘Technical arrears’.[/pullquote]
“The correct position is that, the figures being quoted in the public domain are not as a result of delinquency but on account of the special bilateral arrangements between the Government of Zambia and the concerned creditors, which arrangements have been structured under what are referred to as Paris Club Agreed Minutes of 2005; the benchmark for providing debt relief under the Heavily Indebtedness Poor Countries (HIPC) Initiative,” said Mr. Chikwanda.
The special bilateral arrangements entered into with Brazil, Iraq and China, allow for suspension of debt service payments during the period of bilateral negotiations – pending signing of debt relief agreements. The resultant debt payment arrears are what are referred to as ‘Technical arrears’.
In order to resolve the outstanding ‘Technical arrears’, the Zambian Government has been negotiating with the Governments of Brazil, Iraq and China with a view to signing bilateral debt relief agreements. The resultant agreements will stipulate the mode of effecting debt forgiveness under the HIPC Initiative. The three bilateral creditors are the only remaining creditors that are yet to deliver their share of debt relief to Zambia under the HIPC Initiative.
The Acting President also clarified that since the Zambian Government had not yet signed debt relief agreements with Brazil, Iraq and China, the eligible obligations to these countries would continue to be recorded as ‘Technical arrears’ although no actual money is expected to be paid out by the Zambia Government.
“It is as a result of such arrangements that although the Zambian Government is accumulating the ‘Technical arrears’, neither Brazil, Iraq nor China has been sending demand bills for debt service for settlement. Without demand bills for debt service, there can be no settlement of a debt; therefore, Zambia is not in default in any way,” said Mr. Chikwanda.
The current status of bilateral negotiations on the delivery of debt relief with the three creditors is as follows:
Debt owed to Brazil
The Government of Zambia and the Federal Government of Brazil have agreed that the outstanding debt of US $67. 1 million owed to Brazil will be treated through the special bilateral arrangement. Under this arrangement, 80 percent will be cancelled while 20 percent will be repaid on terms of the agreement to be signed between the two parties. The debt relief agreement between Zambia and Brazil is expected to be signed in December 2014.
Debt owed to Iraq
The Government of Zambia and the Government of Iraq have agreed to settle the outstanding debt of $37 million under the Paris Club VIII debt write-off framework. Under this arrangement, Iraq will cancel 90 percent of the outstanding debt stock, while the remaining 10 percent will be repaid on terms of the agreement to be signed between the two parties.
Debt owed to China
In 2011, the Government of China, through a protocol, delivered partial debt relief by cancelling the outstanding amounting of RMB Yuan 247 million which represented 50 percent of the debt forgiveness from China. The Government of Zambia has commenced negotiations with Government of China on the cancellation of the remaining 50 percent of the outstanding debt. It is expected that the negotiations will be completed by the end of this year and a debt relief agreement signed in 2015. Total outstanding debt to China stood at US $19. 2 million as at end of 2012.
ISSUED BY:
Chileshe Kandeta
Public Relations Officer
MINISTRY OF FINANCE
Why was this misinformation availed to the Auditors when they were conducting audit? Zwa.
The country is a third world country, crippled with poverty
Why is this a taboo?
You a highly geared company, that wouldn’t survive with one, so accept the service please
Thanks
Even the picture of the Ministry of Finance HQ can tell you we are a poor country. They are working in a dilapidated building. Why do you want to live a luxurious life when you can’t afford it? When you expose an unprincipled poor man to money, he is going to spend it carelessly and when he doesn’t have money to spend, he’s going to borrow one way or another. Get our money from Zambia airways, reduce your cabinet, reduce cabinet salaries, stop unnecessary bye-elections, change your finance minister, there’s so many things you can do to save money. I guess being old doesn’t always mean you’re wise, you could be old and foolish too (:
From the picture you can see that we are a poor country. The Ministry of Finance is operating in a dilapidated building? When you expose an unprincipled poor man to money, he is going to spend it all, when he goes broke he will borrow money one way or another. Why do you want to live a luxurious life when you can’t afford it? Reduce your cabinet, cut down cabinet salaries, GET OUR money from Zambia Airways, change the finance minister, stop unnecessary bye elections…the list is endless. I guess old doesn’t always mean you are wise, you could also be old and foolish. (:
Mushota speaks the truth, just ask Nick.
BUFI ba Chikwanda. Dont quote the wrong dates so that it sounds as though MMD was responsible for the debt you have accrued since you have been in power.
Just tell the truth that the debts not serviced are from the time PF came into power. The effect of not servicing debts is next time you want to borrow the cost of borrowing will be astronomical. Only loan sharks will lend money to Zambia.
You have failed to run the economy effectively ,failed to service the debts on time but still borrowing. You are indeed pathetic failures!
Just let HH take over and help the country pay back the debt to save Zambia ‘s face.
Utter recklessness and incompetence! !
From the picture you can see that we are a poor country. The Ministry of Finance is operating in a dilapidated building? When you expose an unprincipled poor man to money, he is going to spend it all, when he goes broke he will borrow money one way or another. Why do you want to live a luxurious life when you can’t afford it? Reduce your cabinet, cut down cabinet salaries, GET OUR money from Zambia Airways, change the finance minister, stop unnecessary bye elections…the list is endless. I guess old doesn’t always mean you are wise, you could also be old and foolish. (:
Even Iraq has featured?
Iraq ? next ni Taiwan. awe sure, when was this money borrowed kanshi?
next ni Taiwan. awe sure, when was this money borrowed kanshi?
The Iraq money was lent to us by Saddam in Kaundas era. However inkongole ni nkongole so we the HIPC must still pay. However China has been consistently cancelling our debts from Kks yime to Sata’s time. That s why its difficult to prosecute Chinese bosses when they foul up in Zed like when they shoot workers
Elo lwanya!! The King has no clothes.
We should service before borrowing more.A nation in debt is a nation of slaves to the lenders.Of course even the most powerful nation in the world has debts but why should we be like them?Individuals are building blocks of nations.AS individuals lets develop habits of not landing in debts .Live according to your means and work towards what you want to be.Let us be productive.
Go back to the drawing table and review the whole Audit Report and the Fiscal Drill. The nation needs to know who is not telling the truth in this matter.
This has nothing to do with Sata, but the professional men and women in these offices of monetory control and observations, which are failing to account for correct data at hand.
I totally agree with you not with this statement #6,”this has nothing to do with Sata, but the professional men and women in these offices of monetary control and observations, which are failing to account for correct data at hand.”
They are trying but if you give a dissent processional view ,you either fired or transferred to a remote region.
Ask the officers at the ministry!
Its good we can get such information only under the patriotic government.
make it kaloba..kekekee
Some more sickening embarrassment for Zambia – At the opening session of the 22nd African Union summit in Addis Ababa, President Sata, who sat next to President Mugabe, summoned justice Akuffo and shared a light moment with her.
“You madam, you must take interest to understand the cause of people’s problems when you call them to your court,” President Sata said.
The President jokingly told justice Akuffo to also summon agriculture minister Robert Sichinga, who was seated behind, and help him manage his hair.
“You must take this one to your court so that he can explain his problem,” said President Sata, attracting laughter from other delegates, including President Mugabe and foreign affairs minister Wylbur Simuusa.
Thank you mr Chikwanda your response is concise it shems the ever lasting PF critics.
# 1 speaking thr the bottom again.
CHILUBA AKONGOLA, AFWA.
LEVY AKONGOLA NAO AFWA
RB AKONGOLA, ENA A BUTUKA….
Premier you have cracked my ribs… RB is a bad borrower….kikikikikiki
The problem of us Zambians is we lack seriousness in addressing issues and wallow in hero worshiping leaders even where they are clearly incompetent. The PF experiment has been a disaster and no amount of spin can take away the fact that Hon Chikwanda and Fredson Yamba have been our worst custodians of the peoples finances.
Even after removing subsidies they seem not to be able to honor the Governments obligations not only to foreign governments but also ;coal suppliers and contractors.Small businesses are now subsidizing Governments reckless infrastructure projects and are not paid for over 1 year. Hon. Chikwanda ran Apollo Construction and should understand how it is not to be paid for work done.
Better resign, Nawakwi was right you are failures. Love the people please by resigning
The only thing Chikwanda knows about economics is borrowing…it seems the man missed lessons on money creation, building finances, savings when he was doing his economics degree.
The sight of Chikwanda signing debts is sickening, this man has gone past his sell- by date. He brings no record of prudent management of public purse, even from way back in UNIP,.Chikwanda left a trail financial ruins which led us to the dark times of the 70s through 80s. Those times will soon catch up with us, he knows Little of modern economics. The level greed and selfishness Chikwanda has displayed in refusing to resign is beyond me. Go home and rest Zambia doesn’t need you.
Zambian parliament should grow some spine to change policies irrelevant to modern times.we can’t continue with the system that gives all powers to one person Chikwanda, to decide when and how much he borrows on our behalf. He reports at the office every morning to figure out where he borrows the next dollar. To him and his boss CNP, “Kaloba”is everything, it brings in their commission and does affect them personally.Tax payers pick up the tab for generations to come. Everyone suffers queuing for essentials commodities (inflation) while they relax on retirement farms and holiday abroad. Something should be done to stop them. A serious revolt ten times bigger than draft constitution demand will do for starters.
lets keep borrowing…who wants to pay back the debt…it will soon be a khongole which will be written off….
so more money in our pockets- lets enjoy the forex ,lets steal from the govt, indeco,bank of zambia, from ministry of health,education,finance etc
In Zed there is no- one convicted of stealing.
After more than 50 years independence , with all this money we are still underdeveloped.
VIVA Zambia, I rest my case….
You have chimbwis who are mediocre at managing their personal kwachas into financial success running our GRZ so did you expect them not to drive us into ruin?
and the blame is on PF? there was Unip, and mMD,. PF is only 2years in power and u want to heap the blame?
Borrowing money has 2 systems in play,industrialized system and consumer system.so America ‘s debt is different from Zambia ‘s debt,how?
American govt wants to sell military weapons to Cambodia,it will borrow money from China,then pays USA companies manufacturing military equipment,their by boosting the companies ‘s productivity and those firms will employ more workers who will be taxed by the state and federal gov’t -boost the USA economy.the other one ,of which Zambia is active is where our govt borrows from china and the Chinese govt attaches conditions by using Chinese firms to supply or manufacture the products,creating employment for the citizens,so Zambia is just a customer for china,no tax,no jobs created but overburdened by the loans on our back.China boost its economy.
So the plan is to continue borrowing and ask for forgiveness, write-off and cancellations from lenders. Embarrassing!!!!
My worry is we do not know the conditions that come with debt cancellation. We have no say over China. Wakamba chabe ati mukamba chani imwe. Timakhululukilani nkhongole. No wonder ma Chinese wapaka mu Z.