Thursday, March 28, 2024

Zambia’s debt levels sustainable – Chikwanda

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Alexander Chikwanda
Alexander Chikwanda

Finance Minister, Alexander Chikwanda says Zambia’s external debt is within sustainable levels as it stands at only 15 per cent of the Gross Domestic Product (GDP).

Speaking to journalists in Lusaka today, Mr Chikwanda said Zambia cannot fall into a debt trap because the acceptable sustainable external borrowing threshold is 40 per cent of GDP.

He said Zambians should not be concerned that the country may revert to a highly indebted country because the current external debt was very manageable.

Mr Chikwanda said external debt is paid over a period of time which allows government to service the debt without any problem.

And President of the African Development Bank, Donald Kaberuka, said external borrowing is not bad if the debt is managed well and money put to good use.

Dr Kaberuka said African countries cannot depend on aid alone but should also go for rating and financial markets to source financing.

He, however, said countries must be careful in the manner they handle borrowing to avoid falling into the debt trap of the 1970s.

Dr Kaberuka said the best way is to invest the money in infrastructural development as opposed to borrowing for consumption.

Meanwhile, the government and the International Fund for Agricultural Development (IFAD) have signed a loan agreement for a US$26.315 million project that will provide rural financial services to smallholder farmers who currently do not have access to such services in rural communities throughout the Southern African nation.

The Zambia Rural Finance Expansion Programme will be co-financed with a $10.8 million loan from IFAD directly; a $11.988 million (Euro 9 million) loan from the IFAD managed Spanish Food Security Cofinancing Trust Fund; and a contribution from the government of Zambia. The financing agreement was signed yesterday by Alexander Chikwanda, Minister of Finance and National Planning of the Republic of Zambia, and by Kanayo F. Nwanze President of IFAD.

Agriculture in Zambia accounts for about 20 per cent of GDP and has the potential to be a major source of economic growth as the country has abundant fertile land and good rainfall. This potential can be better realized through investments in improved production, processing and marketing. Investments like these will be promoted by strengthening and diversifying rural financial services. Currently only about 37 per cent of the adult population use financial services, and only 14 per cent of them have bank accounts.

The new Rural Finance Expansion Programme is designed to help 140,000 rural households by increasing their access to and use of sustainable financial services. The programme will target small entrepreneurs and smallholder farmers while paying particular attention to women and young people. It is estimated that at least 50 per cent of the beneficiaries will be women and 25 per cent youth.

The programme will be managed by Zambia’s Ministry of Finance through its Investment and Debt Management Department, complementing and reinforcing other rural finance services development initiatives such as the IFAD-funded Rural Finance Programme completed in September 2013.

In addition, it aims to enhance the capacity of financial service providers to deliver demand-driven services in rural areas. This will help increase in the number of adults using financial services, and reduce the cost of borrowing.

Since 1981, IFAD has invested a total of $188.5 million in 13 programmes and projects in Zambia, with a total cost of $315.3 million including cofinancing, benefiting 741,280 Zambian families.

37 COMMENTS

    • Zambia is a poor Country, the Agricultural sector needs a revamp, Copper is not what the world wants now compared to the 70’s let me make this short and straightforward:

      Zambia heavily has to rely on Borrowings. The borrowings we have seen are not unprecedented at all. They would have been equally the same borrowings has the MMD not been Privatising where they managed to get most of their funds.
      The PF have a president who clearly wants to make sure the debt we have is not only sustainable but is within the means of a poor country like Zambia.
      The UK has debt of 24% of their GDP being first would country and Zambia at 74% is not bad for a third world country

      Please support this government because their deeds are in our own interests and that of posterity
      Thanks

    • Even in the 1970s, ABC said the same words as finance minister in the UNIP scourges days and led the country into a massive recession. And today’s back for yet another download of poor zedians money.
      “Cheese eating monkey converts”.

    • @Mutuna, UN report, the 15% is the servicing of the total debt of zambia

      Presently at 14.7% of GDP

      Thanks

    • kaloba sustainable??..,,,,, thats new one!,,,,, please go and get more kaloba for presidential medical bills and possible funeral

    • @ Mushota and the other wannabes….15% of GDP is servicing the loans. Then how much are the actual loans????? Thick….very thick! Clueless.

  1. Ba Chikwanda its not about debt sustainability,its about GRZ lacking capacity to manage,astute investment and return on equity.If I make $50k I will not borrow $3000 if I can’t manage it prudently and the return on equity is dismal.

    Borrow to be like Singapore,but don’t borrow to be another Nigeria which has low debt levels.

    • Chikwanda is right and most people who are criticizing him may not have a very good Zambia’s economic history. In the early 1980’s Zambia’s economy was about $4 billion and its debt stock was $3 billion meaning the debt to GDP ratio was around 75% while the cost of servicing this Debt was about 10% of GDP.

      Right now our total debt stock is $7 billion and even if you base it on the unrebased GDP which is $22 billion the Debt to GDP ratio is only 31% or better still basing this debt on the rebased GDP of about $26 billion will give a Debt to GDP ratio of about 27%.In both cases this is way below the Debt to GDP ratio of 60% and above at which debt sustainability becomes a problem.

    • Boko (Western Education) Haram (is Evil) and toxic to the Niger’s neurons!
      Their Eyes they have closed and their ears they have blocked lest they see or hear the suffering of those they lead!
      Your calculations and ratios mean nothing when the economy is actually dead in reality!
      Go around in the streets and the townships and explain those ratios!
      Let’s see if you will come out alive.
      When the masses get more hungry everyday, Anger becomes more palpable as the situation is now! Not surprising when teachers start sorting out evil bosses who fail to accurately read the mood of those they lead!

    • ” Boko (Western Education) Haram (is Evil) ”

      Actually it is a myth (one of many) that Boko Haram means ‘western education is evil’.
      According to the CSM:

      ” According to Muhammad, boko originally meant “Something (an idea or object) that involves a fraud or any form of deception” and, by extension, the noun denoted “Any reading or writing which is not connected with Islam. The word is usually preceded with ‘Karatun’ [lit. writing/studying of]. ‘Karatun Boko’ therefore means the Western type of Education.”

      Source: ‘Boko Haram’ doesn’t really mean ‘Western education is a sin’
      By Dan Murphy, Staff writer / May 6, 2014
      CSMonitor

  2. Good ! Thats what matters,it is all about sustainability.Very few nations if any in the world have no debt.Sustainability is the key.

    • Sustainability?
      More money is spent just on servicing (not repaying) debt that on health and education combined. What the heck are you talking about?

    • You are just ranting without putting all things into perspective. You c`nt make proper judgement when you politics comes before objectivity. Let me copy & paste what one wise blogger Nkhata has said maybe it will make sense “In the early 1980?s Zambia’s economy was about $4 billion and its debt stock was $3 billion meaning the debt to GDP ratio was around 75% while the cost of servicing this Debt was about 10% of GDP.Now our total debt stock is $7 billion and even if you base it on the unrebased GDP which is $22 billion the Debt to GDP ratio is only 31% or better still basing this debt on the rebased GDP of about $26 billion will give a Debt to GDP ratio of about 27%.In both cases this is way below the Debt to GDP ratio of 60% and above at which debt sustainability becomes a problem…

    • Spot on Saulosi.These people are just arguing without even understanding anything.This is how low the opposition cadres have become they just argue for the sake of it even for things they don’t understand.

    • @ Saulosi

      Ok great brain. If I am ranting, then you put all things in to perspective if you can. You know, sometime is better to keep mum. You never know, you may even look knowledgeable. As to “rants”, LOL, you have replaced my favorite comedian. Carry on looking for the bright side of life…………

  3. TODAY’S BORROWING IS NOT FOR ELECTIONS (CONSUMPTION) BUT IN FOR INFRASTRUCTURE DEVELOPMENT. BORROWING FOR INFRASTRUCTURE DEVELOPMENT IS THE MOST WISE AND DESIRABLE BORROWING. PLEASE, AS LONG AS THE MONEY WILL BE USED TO CONSTRUCT RAIL LINES, DO BORROW AND BORROW ENOUGH.

    • As wise commentator, I fully agree with Peter. Some of you on this platform like Mushota are what Zambia needs to dispose of, please Mushota if have nothing to do or say stay away from commenting. I have been watching your commentary and its really annoying when you see people support people that you know deep down are destroy our country. The fact is SATA is BAD for ZAMBIA and the sooner he is removed together with this brainless Chikwanda the better for Zambia. THE ISSUE MUSHOTA IS THAT THE MORE IS BEEN MISUSED FOR UNNECESSARY THINGS SUCH AS ELECTION AND SUSTAINING THE HEALTH OF SOMEONE WHO IS CLUELESS ON HOW TO LEAD THE COUNTRY. THIS MONEY IS NOT BEEN USED FOR INVESTMENTS SUCH AS FACTORIES, MANUFACTURING PLANTS ETC (THINGS THAT CAN GENERATE INCOME)

  4. Each time ABC mentions debt sustainability just know he is about to borrow more!
    Loanees are now in bondage to pay 28% interest on bank loans from 21% all because of this stup!id way of doing things! It’s all up to Zambians to stop this madness before you start paying 50% interest on loans.
    ABC will go down in our history as the chap that killed Zambia’s economy twice!

    • ” It’s all up to Zambians to stop this madness before you start paying 50% interest on loans. ”

      Sort of. There is a reason why the IMF isn’t making loud objections, or talking about putting sanctions on the Zambian government.

      The same IMF that wants poor people to pay for healthcare and education or go without, or who claims that higher wages are ‘inflationary’, the same IMF that demands inflation for consumers by demanding the devaluation of the currency, this same IMF does not lift one finger when the debt doubles or triples through borrowing and selling these billion dollar eurobonds.

      Even former finance minister Situmbeko Musokotwane said “You can always borrow”, while shielding the mines from taxation.

  5. Diversify, diversify. And new industrial, manufacturing income required. That should be our ideal mantra. Every country needs to borrow and needs investors, but only if those economic activities are providing a good addition to GDP. A lackadaisical mantra of ‘sustainable debt,’ is not necessarily a good economic strategy. After all the interest on the debt is affected by market fluctuations, and there is always danger of defaulting on repayment deals.

  6. HH would be the best manager of debt and it’s appropriate utilization but the north monkeys will do everything to prevent him and the west lizards will not support him. The east rats will be trying to eat what’s left of the monkey table and the north west will be frying their foreskins

  7. HH would be the best manager of debt and it’s appropriate utilization but the north monkeys will do everything to prevent him and the west lizards (hopani or water monitor) will not support him. The east rats will be trying to eat what’s left of the monkey table and the north west will be frying their foreskins. So as always the southern cows will be slaughtered for barbecue

  8. End game surely you are either politically brain washed or frustrated illegal immigrant failing to articulate issues at hand. If you feel insulting people who hail from Eastern, Northern, western and Luapula provinces by the failure of your under 5 to co-work with others. Some of you Tongas are full of hatred, envy and lacks the ability to work across tribal lines. The Truth pains, UPND under Mazoka aka Andy was vibrant and inclusive. The demise of one of the best man of the people from the time he was MD at ZR, brought people like HH preaching UPND IS TONGA AND BELONGS TO TONGA, the post warned HH about his political approach. You claim to be tribal cousins with the lozis when you treated Sakwiba Sikota as if he was not number two to Andy. 2016 wont be different from 2011. wait

  9. MrK, spare us with half baked information, the problem you contribute without thorough research. Musokotwane is not even qualified to talk about taxing mines because it he who advised the MMD govt to change mining taxation.
    Through this he benefited even bought a house in one of the posh areas of London. Mrk just tell us something else. Stop hallucinating about 20yrs wasted by MMD. If MMD had men and women with brains Zambia would be better but PF has done much Tarmac in rural area of Kasama never even during UNIP. Lukupa river and health centre are vital to Kasama but since independence not even a permanent road. Today there is tarmac and the health centre is midwifery training school. This what development mean and smell. No wonder UPND is scared like a rat in the hole.

  10. Unfortunately the Eurobonds Chikwanda is borrowing will mature at once I.e. in bullet amounts. That’s the way bonds operate. They are not instalment loans. The political leadership in the early 2020s will have to deal with this financial time bomb.

  11. @pafamamwine
    u ar right i had a chance to ask those pipo around that area (LUKUPA) they ar very happy with the development going that side.oz dey av neva witnessed that since the existance of lukupa its only under pf.its a pity that dis OPOS they dont travel around t se for thenselves nowanda they chok with envy wen they elections,oz dey ar very dull in readin the political mud

  12. Borrowing for Infrastructural development for as long as it is Sustainable is fine as is the case with Zambia .Our cost of debt service including the recent$1.5 billion euro bond is about $220 million which is about 1 % of Zambia’s unrebased GDP . Infrastructural development is critical for economic growth . The Government must be commended for having adopted this strategy as for the first in our history western province will see the completion of the Mongu Ka labo road. This is the most expensive road in Zambia costing about $300 for a 75 kilometre stretch but very key for both domestic and international trade.The road will be in bridge form passing through the plains.

  13. This OLD Dragon Chikanda is a BIG LIAR! There is nothing in this World known as the acceptable sustainable external borrowing threshold – that 40 per cent of GDP is highly misleading as Economies are differently structured and cannot have a common threshold. It wouldnt even make sense to compare the British to the German or US economies let alone that of a poor country like Zambia or Haiti!

    Anyone with common sense knows that it is unacceptable to borrow recklessly to the extent where 40% of your eranings go towards repaying debts – nonsense!

    That Kaberuga is an unknown untested entity who has never run a vibrant financial institution – Tell us which one! He is simply telling outdated Geriatrics like Chikanda & Satan what they want hear so they can vote for him again..*****!

    • 40% of Zambia’s earnings is not going towards debt servicing.our earnings are about $6 billion this year and total cost of debt servicing is only$200 million meaning only 3% of our earnings is going towards debt servicing.

  14. (THE NATION) Haiti: A Creditor, Not a Debtor
    It is we in the West who owe it reparations.
    Naomi Klein
    February 11, 2010 |
    This article appeared in the March 1, 2010 edition of The Nation.

    §The Slavery Debt. When Haitians won their independence from France in 1804, they would have had every right to claim reparations from the powers that had profited from three centuries of stolen labor. France, however, was convinced that it was Haitians who had stolen the property of slave owners by refusing to work for free. So in 1825, with a flotilla of war ships stationed off the Haitian coast threatening to re-enslave the former colony, King Charles X came to collect: 90 million gold francs–ten times Haiti’s annual revenue at the time.

  15. With no way to refuse, and no way to pay, the young nation was shackled to a debt that would take 122 years to pay off.

    In 2003, Haitian President Jean-Bertrand Aristide, facing a crippling economic embargo, announced that Haiti would sue the French government over that long-ago heist. “Our argument,” Aristide’s former lawyer Ira Kurzban told me, “was that the contract was an invalid agreement because it was based on the threat of re-enslavement at a time when the international community regarded slavery as an evil.” The French government was sufficiently concerned that it sent a mediator to Port-au-Prince to keep the case out of court. In the end, however, its problem was eliminated: while trial preparations were under way, Aristide was toppled from power.

  16. The lawsuit disappeared, but for many Haitians the reparations claim lives on.

    §The Dictatorship Debt. From 1957 to 1986, Haiti was ruled by the defiantly kleptocratic Duvalier regime. Unlike the French debt, the case against the Duvaliers made it into several courts, which traced Haitian funds to an elaborate network of Swiss bank accounts and lavish properties. In 1988 Kurzban won a landmark suit against Jean-Claude “Baby Doc” Duvalier when a US District Court in Miami found that the deposed ruler had “misappropriated more than $504,000,000 from public monies.”

    Haitians, of course, are still waiting for their payback–but that was only the beginning of their losses.

  17. For more than two decades, the country’s creditors insisted that Haitians honor the huge debts incurred by the Duvaliers, estimated at $844 million, much of it owed to institutions like the IMF and the World Bank. In debt service alone, Haitians have paid out tens of millions every year.

    Was it legal for foreign lenders to collect on the Duvalier debts when so much of it was never spent in Haiti? Very likely not. As Cephas Lumina, the United Nations Independent Expert on foreign debt, put it to me, “the case of Haiti is one of the best examples of odious debt in the world. On that basis alone the debt should be unconditionally canceled.”

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