Debt

The Jesuit Centre for Theological Reflection (JCTR) has opposed to the Government’s plan for an upward adjustment of the debt ceiling from K35 billion to K60 billion.
In a statement the JCTR said;

“While we appreciate the Minister of Finance’s right to increase the debt ceiling in accordance with the provisions of the Loans and Guarantees (Authorization) ACT Cap 366 of the Laws of Zambia, we disagree with his request for an upward adjustment of the ceiling from K35 billion to K60 billion.

However, we are glad that government has created a sinking fund, though belated, as it will ensure smooth repayment of the two Eurobonds which were contracted in 2012 and 2014. We are however, dismayed at the extent of the fiscal deficit reported in the Minister’s statement and the key policy proposals by which he intends to address the fiscal deficit.

The Jesuit Centre for Theological Reflection (JCTR) is saddened by the gloomy economic outlook that was stated in the 2015 Mid- Year Economic and Budget Review Statement made to the National Assembly on 16th June 2015 by the Minister of Finance.

Zambia should not embark on reckless additional debt contraction

What is particularly saddening is the size of the projected fiscal deficit of K20.0 billion representing close to half of the 2015 budget. We are also disturbed that the government plans to abridge the fiscal deficit by way of borrowing on commercial terms. The Minister of Finance in his statement further requested the Legislature to increase the ceiling on external borrowing from the current K35 billion to K60 billion. As a Centre we hold that Zambia’s current economic malaise though it has some historical attributions, we are nevertheless convinced that it has been worsened by poor fiscal governance attributed to poor policy choices. Clearly, there is a massive mismatch in national policy priorities.

We dismiss the Minister’s rational for additional debt contraction to address the fiscal deficit. His argument that Zambia’s public debt currently standing at 29 percent of Gross Domestic product (GDP) is still sustainable and therefore warrants room for further debt contraction should not be entertained by parliament. We contend that Zambia’s public debt as a share of domestic revenues has already reached the critical threshold of 15-20 percent beyond which austerity policy measures will have to be undertaken. Given the size of our economy, additional debt contraction is going to adversely affect social sector spending therefore spelling grave consequences on posterity.

A government that throws away its mining tax regime that would have ensured a more balanced budget should not be trusted with borrowed resources.

As JCTR we state that Zambia should not embark on reckless additional debt contraction. The nation cannot borrow its way out of its development challenges at every instance. We appeal to the executive and the legislature that the way ahead for Zambia clearly requires tough decisions, tough choices and fundamental socio-economic transformation without which the current situation will worsen as we proceed into an election year. We therefore appeal to parliament not to heed to the dictates of the executive on further debt contraction. Parliament must guarantee Zambia from a sovereign insolvency on this score. If parliament approves the executive’s midyear budget proposal on increasing the debt ceiling Zambia will pay a high price in terms of further social and economic polarization which will include diminished investor confidence and higher future taxes.

Proposal

Accordingly, JCTR recommends a wide range of policy proposals which include

  • a reconsideration of the nation’s taxation system as well as guaranteed public policy consistence and a re-evaluation of some of the current capital and infrastructure projects.
  • Government needs to do more in terms of reducing unnecessary expenditure including closure of some embassies that have hugely contributed to this crisis as the Minister himself mentioned.
  • Further, the decline in trade taxes recorded by the treasury on account of reduction in import volumes though attributed to the high cost of foreign exchange also stems from the administration of trade taxes. Has the executive dared to compute the customs business and tax collection downturns on account of recurrent failures to clear goods in accordance with the ZRA service charter owing to intermittent internet services which impinges on efficient and effective functionality of Asycuda World which results into goods being marooned at ports of entry?

We find it disturbing that of all the reasons advanced regarding the dismal economic performance recorded in the first half of the year resulting into a K20 billion deficit, the executive has all but blamed it on exogenous factors and not once have they taken responsibility for some poor outcomes stemming from reckless policy choices they have pursued.

We shudder to think what the end year deficit will be. While there could be room for more borrowing, the current government’s public finance management record does not inspire confidence that increased borrowing will bring any meaningful results.

A government that throws away its mining tax regime that would have ensured a more balanced budget should not be trusted with borrowed resources. Government has further surrendered markets and bus stations that would have brought in more revenue to government to PF cadres and yet they expect Zambians to support their borrowing spree. The poor economic choices of the government are no longer sustainable. Therefore, we call for the executive to put its act together by intensifying domestic resource mobilization, rationalizing expenditure and asserting the nation’s fiscal sovereignty.”

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18 COMMENTS

  1. Acceding to Jamasoni Lungu and his PF minions, the solution to Zambia’s financial problems is not to cut unnecessary spending such as ministers trips, overseas medical care, cars, fuel, weekend allowances, First Lady unproductive trips etc. Their solution is to keep borrowing with no concrete plan how the money will be paid back. We have not seen this plan at all an I challenge Lungu and Chikwanda to provide us this plan.

    In Zambia we never challenge these people for concrete solutions as a criteria for being voted into office. We are being led by the wrong people and they are driving the country and future Zambian generation into perpetual suffering.

    Meanwhile clueless musicians such as Dandy Crazy, Dambisa, and the incarcerated felon Kanene continue to sing praises for these…

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    • The Zambian government should be frugal in its spending, there are no signs of this happening.

      Ministers in developed countries NEVER receive car, fuel, housing, servant, entertainment allowances etc, because the government has to save money and use it for more productive purposes for the citizens.

      This should be the same in Zambia. Those wishing to serve in government should be prepared to sacrifice and use their own resources before they can enter government. This should be a new LAW. Otherwise do not stand for an election at all.

      Most of the ministers serving in Zambian government can even afford their own cars, fuel, accommodation etc. Why give them more?

      The Zambian government should save money!!!

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    • The Jesuits conclude by saying and I quote “… Therefore, we call for the executive to put its act together by intensifying domestic resource mobilization, rationalizing expenditure and asserting the nation’s fiscal sovereignty.”

      I would like to address “intensifying domestic resource mobilization” referred to by the Jesuits … this should be the number one focus for GRZ. First of all, we are always cheated out of realizing the true value of our mineral resources because we have not intensified mobilization.

      For instance, our copper refining process is still ancient; the same ore that we get copper from contains platinum, gold, silver and uranium but because we focus on copper alone, we drain other minerals in the Kafue River.

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    • GRZ needs to mandate new refining processes at each mine that should be followed and each mine that does not follow this process needs to be taxed on lost revenue.

      The tailings, flux, and copper powder are added to the ribbon blender to produce a homogeneous mix. The mixture is then conveyed to the smelting kiln at 2150F for 2.5 – 3.0 hours. The slag from this operation is crushed and returned to the ribbon blender as well as the discharge from the bag house.

      The copper Dore is then poured into water to produce a high surface area copper (mossy). This allows the copper to dissolve quickly in the sulfuric acid. This concludes the pyro metallurgical (furnace) part of the process with all fumes generated being captured by the bag house.

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    • Continued … The hydrometallurgical (chemical) begins with copper being added to concentrated sulfuric acid in a reactor at temperature and pressure to dissolve all the copper, but none of the precious metals (platinum, gold, silver and uranium).

      The precious metal precipitates are then filtered and rinsed with hot water. This solution, which is copper sulfate, passes through an ion exchange column to scavenge any precious metals and the copper sulfate is sold to an end user.

      The precious metals precipitate is then fed to a reactor where the mix of hydrochloric acid and hydrogen peroxide. All of the precious metals are dissolved except silver. The solution is then filtered to recover silver chloride which then goes to a refiner.

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    • Continued … The solution is then pumped back to the reactor where the gold is precipitated. The gold is then filtered and washed and the gold powder is then sold to a refiner.

      The solution is again pumped back to the reactor where the platinum group metals are precipitated collectively and sold to a refiner. The solution is recycled back to the hydrochloric acid and hydrogen peroxide dissolution step.

      All acid fumes are collected by an acid scrubber which produces salt water and sodium sulfate which can further be processed to sodium chloride a more valued product and nothing is discharged into the Kafue River.

      My estimates are that we lose about 350,000 tonnes a year in platinum, gold, silver and uranium combined just sent into Kafue River

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    • At today’s market rate, that’s close to $100 billion a year in revenues sent into the Kafue River as pollutants that kill another 500,000 tonnes of fish and based on December 2014 price of fish per tonne as $2,388.57 we kill an estimated $1.2 billion a year.

      We spend millions trying to purify the same water for drinking, etc and with all other economic/opportunity cost we lose almost $120 billion in real GDP of which GRZ could recover close to $40 billion in tax revenue.

      Our current GDP as of the last estimates at hand is $22 billion add the $120 billion lost due to not intensifying domestic resource mobilization, we would be in Paradise and not be looking for another $2 billion Euro-bond.

      I agree with the Jesuits and here above is my way of helping solve this ~ B R Mumba, Sr

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    • B.R. Mumba you have constructive suggestions there. I hope some officials get to read them. with interest. I believe there is much so revenue potential in the extractive process. We don’t even need an army of financial experts to see it.

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    • Ba Nine Chale:

      Natotela mukwai … the other side of this is that some mining companies know this and they are doing everything to just declare revenues from copper alone.

      This allows them to export the slag which they further refine outside the country to recover platinum, gold and silver. Uranium is a controlled substance around the world so they most leave this radioactive mossy alone.

      It would take total transformation of mind set and caliber to actualize this but the smart people of the Zambian Enterprise are equal to the task, they just need leadership that understands the process.

      This is just the tip of the iceberg … I rest my case.

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    • B.R. Mumba you have constructive suggestions there. I believe there is so much potential for revenue in the extractive process of our resources. The good thing is that we don’t even need an army of financial experts to find solutions. We just need to listen and learn from each other.

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  2. Yes, but you and your fellow priests campaigned long and hard for the PF.

    This phenomenon of spending beyond our means is nothing new, so why has it taken you so long to find your voice?

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    • Jesuits never campaign for a political party. They campaign for the poor. They are ardent advocates of social justice. Believe you me, I know these guys. They know what they are talking about. It takes 11-15 years to train a Jesuit. They have no time for political party politics.

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  3. The best comedy of the year.You start sinking fund account when you are broke what are you going to put in the sinking fund account when you have no money?
    The AU summit ended on Monday but today is Friday the President is no where but attending to medicals but we pay for their stay together with his entourage in South Africa,what a waste of resources and this is the way to spend loans on Presidents Health?
    Zambians let us defend our country Chikwanda is already in his late years he doest care as he has made money for his children already

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  4. When things are tough in the home you reduce unnecessary things . Alas this government has still a bloated cabinet , deputy ministers . It still buys expensive vehicles for minister. And yet rich nations drive very moderate vehicles. Africa bwafya.

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  5. Hey ba clueless GRZ dullards the Argentine gov’t called and they want their title of “indebted losers” back.

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  6. God is very justified to make us Africans poorer.

    It makes absolutely no sense that rich nations with immense wealth are more prudent with few perks and allowances while dirt poor Zambia is overspending its little $$ on wasteful benefits.

    Why invest in unproductive losers while more wealthier nations know that its investing in return on investments that really matters.

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  7. Zambia is slowly being mortigaged.
    PF government has run out of ideas in the management of our country. Debt has increased without its application to national development. Much of the debt is for consumption and mismanagement of balooned government allowamnces spiced with corruption.
    Change is a MUST for complex management system to tackle this national imbalance.
    Future generation will judge this government harshly for debt repayment which will be left behind long after PF is gone. Zambians MUST act now to change this govenment.

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  8. PF has run out of ideas how to generate income hence taking the easy way out route which is but expensive. It is sad that we are preparing for our children to be leaving this country to be economic refuges (Asylums seekers) thanks to poor finishing (PF)

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