Minister of Commerce Li Jinzao (left) after signing various agreements
in the presence of Vice President Guy Scott and Chinese Vice President
Li Yuanchao (second from left) look on at Government House in Lusaka
Economic belt tightening and the sliding kwacha are forcing renewed calls for the government to rethink plans to borrow $103 million from an overseas bank to settle debt owed to a Chinese company on behalf of a foreign investor.
The opportunity to shelve the foreign exchange loan came as the new Bank of Zambia Governor Denny Kalyalya was sworn in this week by President Edgar Lungu, who urged the Governor to find a quick solution to the depreciation of the kwacha, which is trading at record lows.
Sources this week said that signing of the Chinese loan agreement was imminent, but that the faltering economy was likely to prompt a reconsideration of the plan, which has been called into question by Transparency International.
The well-respected non-governmental organisation has called for finalisation of the loan to be postponed pending further assessment.
Finance Minister Hon. Alexander Chikwanda got tentative approval in principle for the loan from the previous Cabinet in November, according to reports, less than a week after President Michael Sata’s funeral.
The loan from the Export-Import Bank of China was earmarked to settle a debt to Chinese telecom firm ZTE for work for Zamtel while the latter was run by Libyan telecom company LAP GreenN.
Since the loan proposal came to light there have been calls for it to be stopped amid concerns that such large borrowing by the nation would be unwise.
“In the context of renewed economic problems, the loan now seems increasingly unlikely to be signed, and financial commentators expect the proposal to be quietly shelved,” said a financial expert, who did not want to be named.
“As the kwacha continues to depreciate the Zambian government can no longer afford to burden taxpayers with this enormous debt in order to settle a debt incurred by a foreign investor whose original attempt to takeover Zamtel was itself deemed unlawful,” he said.
Approval of the loan from China in the current economic climate would have profound implications for Zambia’s image on the international stage, risking long-lasting damage to its carefully built image as an investor-friendly destination.
By John Banda – freelance journalist
Does Zambia need to be colonised? U pipo are just dull.
Meanwhile 1USD=K7.760….. We have idi0ts in power.
Am I missing something here? Is the loan meant to pay Lap green for PF renationalising Zamtel ?
If so then there is no need for it, because it will just into thin air.
PF is beginning to tell the truth in bits and bobs that government is broke.
PF must say the truth, that government is broke and its ability to borrow is now questionable even by the Chinese Bank since Fitch down grades Zambia ‘s economic out look and credit worthiness.
PF wants this money to settle Loan interest repayments which have fallen behind and going up day by day.
Under PF Zambia is in a mess.
UNPD and HH are our only hope to restore Zambia.
My prediction about the Kwacha hitting over K20.00 per US$1 is moving towards fulfilment at a great speed.
The fortunate is as the Kwacha is crumbling, the PF is too.
Rumour has it that Kalaba is positioning himself to challenge Lungu in 2016 general elections.
I warned Lungu to watch Kalaba, Emmanuel Mwamba and Luo.
Expecting a positive economic outlook under the PF clock is truly unwise of any person. Pf only knows how to spend and not how to generate income, hence the possession with borrowing irresponsibly.
President Lungu still happens to be the same Chakolwa we knew we were voting for. He has only succeeded in bringing in a few more Chakolwas like himself to govern with him. The government coffers will indeed, soon run dry. For that, we only need to give ourselves a pat on our backs for the smart choice we made.
He left out the likes of Guy Scott, who don’t drink with him.
ifintu ni lungu that was the slogan and we voted for him. After casting that vote in favour of PF, we lost our right to complain about our country. He told us that he had no vision, we were told he is sick and he STOLE money from his client. What did we do, we said ifintu ni lungu..
GBM got a $250 million car and zambian government loan of $120million . What was the point og independence if you can’t looking after your own people ? Just ask England to rule you again . How many Loans has zambian government asked in 3 yrs or 50 years since independence .
The economic situation in the country is easy to solve but you need a team of dedicated individuals with the same mindset to set it on the right trajectory. While ABC has been instrumental the last three years, it is becoming evident to me that we need a totally new approach.
We have too many cooks and the soup is turning stale. Here are the facts; the lowest GDP per capita was under the MMD at $557.15 with GDP Annual Growth at -8.63% (negative growth). The highest was under UNIP at $1,084.74 with GDP Annual Growth at 16.65% (positive growth).
The current GDP Annual Growth rate is 7.10 (December 2013) PF GDP per capita is $851.26 latest available numbers. We are still among the ten fastest growing economies in the would but still a long shot compared to Switzerland per capita.
Our new approach should look at what UNIP did to grow the economy in just one year by 16.65% forward while the MMD killed it in one year to the tune of 8.63% backwards.
The analysis is simple, the MMD put an emphasis on foreign investment while UNIP put its emphasis of domestic government investment. We under UNIP invested heavily because we controlled factors of production.
Under the MMD we lost factors of production and placed those in foreign hands. The Economy is like National Security, you don’t entrust that to other people. You got to have your own skin in the game.
You don’t borrow your way out either, that’s where in UNIP lost it when we started getting into tight spots, you do a series of things that can easily self-correct the economy in just one cycle.
The current scenario is easy to fix; it needs a steady hand and experience which I think ABC still has but it will also require developing a new set is strategies in a team setting.
This will require a lot of input from Margaret at Commerce, Lubinda at Agric, Yaluma at Mines, whoever is at Energy with Kalyaya at BoZ monitoring fundamentals and offering alternatives while the ZRA Commissioner would be tasked to increase his revenue generation efforts.
This is your team involved in operations and they are the first tasked with the internal combustion engine apparatus of an economy. Proper scrutiny of monitoring as well as execution in operations drives up higher GDP output.
I would make this team a separate group meeting with me twice a week apart from regular cabinet meetings.
Too much free info for now … have yourselves a super blessed day, Zambia
Olo muntu mu komboni nkongole zikapaka upeza bamuponona!
Wait a minute! ” from an overseas bank to settle a debt owed to a Chinese company on behalf of a foreign investor” there is a middleman here which makes the loan expensive. Is the government saying they can’t go directly to the bank? I smell a rat called corruption. Someone stands to benefit!
borrow, borrow, borrow, borrow,borrow, borrow, borrow, borrow, borrow, borrow, borrow, borrow,borrow, borrow, borrow, borrow,
Thats all these monkey can do, can’t produce wealth on their own for such a rich country.
What a pity.
$100M is such a big deal for Zambia. This is small change for most people I know, it won’t even buy them a descent yatch
There was a time the government was warned and advised against borrowing loads upon loads of money. So this is when they are honestly realizing that they should have paid heed to the advice…And they say they are a listening government. Does it mean they had lost their sense of hearing all this while? Or maybe they had on beats by dre headsets?
Hahahahahahahaha ati beats by dre
This man can’t rule,he can’t govern, he’s politically impotent!! Foolishness and stupidity has rocked Panga family.
ifintu ni lungu that was the slogan and we voted for him. After casting that vote in favor of PF, we lost our right to complain about our country. He told us that he had no vision, we were told he is sick and he STOLE money from his client. What did we do, we said ifintu ni lungu.
How free are we if we keep turning back to our colonial masters for as little as $103 million, 50 years after ‘weaning.’ That is why those masters keep discriminating us racially if we can borrow a square meal for our citizens ( on a light note though criticism expected) .Before we indebt ourselves,was the money utilised to our expectations? Without fear of contradiction, let me finish by saying that our problem is corruption and misplaced priorities.
The situation with the Kwacha can not be corrected or stabalized by borrowing money to increase our stock of dollars. The cost of borrowing will eventually overwhelm our economy. We need to reduce our insatiable appetite for import goods that are not essential or related to investment. What the government is doing might seem to be a solution in the short term but ultimately will lead to a deeper whole. Unfortunately foreign investment is a double edged blade. You need it to provide employment and boost production but at the same time you find the country being extracted. What government should do is offer a small tax concession for companies that do a certain amount of banking in Zambia for income they earn from selling goods outside Zambia. We are being Extracted.
There is no question the money belongs to these companies and they can still access it whenever and however the choose. All we should ask is that a certain percentage be banked in our system so it can help with forex supply. As it is now for instance copper leaves Zambia and only a tiny amount of the proceeds ever reach our economy. Most of these firms probably keep even thier operational capital in banks outside Zambia. Zambian banking system also needs to be modernized so these firms do not harbour fears of thier operations being hindered by too many variables like not being able to perform transactions internationally because the communication systems are down. We can help with the supply of forex by applying modern incentives and not forex controls.
Iwe namwe a John Banda
This is purely an alarmist article without well sourced sources (it is embedded with your personal opinion). Don’t be a ‘chair-nalist’ , strive to become a true journalist who informs the populace with true and well sourced stories.
Where do you want the government to go and borrow money from, when ‘all’ countries in world want Chinese money… Do you us want to borrow from the western imperialists who will make sure that we include homo-sexuality and the dropping of the phrase ‘Christian Nation’ as a prerequisite for just sitting on the table with them.
Ati malabishi bati.
Zambia is slowly dying, the few at the expense of the many poor, enjoy the benefits of the Nation. The likes of Chikwanda need to be retired and investigated. How can one allow so much debt in such a short time? I mean we know he’ll be dead and we will keep on paying or rather just servicing our debts. Things are not well & the sooner it is acknowledged, the better. We said in 2011, never mind 2014, PF has seriously messed up our once great country!