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How Zambia’s excessive borrowing will affect you soon, take more money from your pocket and bring IMF back !

By Kalima Nkonde

There has been a lot of debate about the loans that the Government has contracted in the last four years with the latest one being the $1.25billion over a month ago. The ruling party has defended the loans as money well spent on infrastructure projects thus “ developing” the country. The critics, on the other hand, have condemned the rate and the amounts that Zambia has borrowed in such a short period of time which is unprecedented in our fifty year history. Debt contraction is not supposed to be politicised nor should it be a partisan issue but rather a national economic issue which should be rationally debated. The Government should also be transparent in everything they do with regard to debt from contraction to utilisation as it is tax payer’s money that will service the loans.

Debt contraction, if recklessly done, will not only affect PF supporters but non supporters too. All Zambians will suffer the consequences whether they like it or not and therefore an objective analysis and approach is required. In May 2014, the International Monetary Fund ( IMF) Managing Director, Christine Largade cautioned African Governments against overloading with too much debt stating: “ when some African countries go to the bond market, they are exposing themselves to the market discipline which they do not understand. You can see the results with Ghana.” Judith Tyson of the Overseas Development Institute(ODI), a Thinktank, however, believes that, “The IMF could do more to highlight the risks posed by Sub Saharan African countries taking excessive debts.” It is clear that the experts agree that excessive debt comes with immense risks on the borrower and its people. Unfortunately, it appears that the PF government does not understand the inherent risks in excessive borrowing and its consequences.

The purpose of this article is to educate everybody across the political spectrum about the possible consequences of excessive government borrowing especially the US dollar dominated Eurobonds. It should be noted that the term being used is not “borrowing” but “excessive borrowing”.There has been a lot that has been written about Zambia’s public debt but it has been rather too technical and the message has not permeated to an average Zambian. In order to ensure that everybody understands, the analysis has avoided the use of technical terms like securities, instruments, coupon rates, redemption, yields, sovereign, fungibility etc.

The analysis starts by stating the total amount of debt that Zambia has contracted so far and explains why the Government found it so easy to borrow. It then discusses the purpose for which the money was purportedly borrowed for and thereafter explain the risks that will make the servicing of the debt difficult. Finally, it explains the likely effects that excessive borrowing will have on every body including the man on the street and how the dreaded IMF will come back at our own invitation and haunt us once again with harsh conditionalities!

What is Zambia’s total public debt ?

Zambia’s total public debt is $9.75 billion dollars, made up of $6.05 billion external debt and $3.7 billion dollars domestic debt. The total public debt has increased from $3.5billion in 2011 to about $9.75billion an increase of 176%. This rate of debt contraction in such a short space of time should be considered excessive borrowing by any standards, even if it may be below technical threshold of 40% of GDP! The majority of experts will agree that this kind of excessive borrowing comes with immense risks and Zambians are likely to face the consequences sooner rather than later .

The interest for the three Euro Bonds alone, according to Zambia Institute for Policy Analysis and Research is estimated at $240 million per annum or K1.8billion per year .The amount involved in servicing interest and setting aside to pay original principal amount( setting up sinking fund), is currently estimated by some experts to be $440 million annually or K3.5 billion for Eurobonds alone. According ZIPAR all external debt interest payments currently amount to K3.8 billion and when added to domestic debt interest of about K2.9 billion, the total interest we are paying on public debt is K6.7 billion which is higher than the entire health budget of K4.5 billion!

Government mobilization of domestic revenue through tax collection would have reduced Zambia’s need to borrow so heavily on the international debt market. Zambia’s tax revenue to GDP ratio is comparatively low at 19% and we lag behind Zimbabwe at 26%, Botswana at 30% and Namibia at 32%. Zambia did not need to borrow so much if more taxes were collected but the PF Government took the easier route of Eurobonds using the debt capacity built by former MMD government over 20 years which they have almost exhausted in four years!

Why has PF government borrowed easily?

Zambians must have been wondering how it has been so easy for the PF Government to borrow and not the MMD before them! The answer is that the MMD were more responsible managers of the economy, whereas the PF have not been. The facts as they stand are that the MMD laid the foundation; but they were more disciplined and did not abuse the borrowing capacity they had created, whereas the PF went on a borrowing binge on seeing the available ability to borrow;motivated by legacy and populist agendas which have started haunting them through the economic malaise we are experiencing.

The MMD government especially under President Mwanawasa improved the performance of the Zambian economy and the country started registering high economic growth rates in excess of 7% over a 10 year period partly due to the booming copper prices but mainly due to prudent and consistent macroeconomic policies and good public sector financial management which unfortunately have all gone out of the window in the past four years. The good macro economic environment led to our Government earning international credit rating by international agencies like Fitch, Standard and Poor, Moody’s and thereby qualifying us to borrow from the international Capital/debt market composed of pension funds, private equity funds, insurance companies, rich (high net worth) individuals and other institutional investors – who were looking for high income (return) on their investment.

The financial crisis of 2008 led to lower interest rates in the US and other western economies, private investors in the western world and Asia were looking for customers to lend money to and Zambia like other African countries became attractive especially that their exports ( raw materials) like our copper prices were booming due to the demand for imports from China and thus provided security for investors in terms of ability to pay. Eurobonds are loans from private investors and not multilateral institutions like IMF and World Bank as was in the past with the UNIP regime of first President Kenneth Kaunda.

And unlike the IMF and the World Bank, the private investors do not put conditions on how the money is going to be used and the arrangement is much quicker. The fact that they do not put conditions on how the money is going to be spent creates the danger of abuse of what the money is actually used for. It follows that the Zambian Opposition’s allegations about latest Euro Bond being used for 2016 campaigns by PF is not entirely out of place in the absence of transparent disbursement plans, monitoring and evaluation of funds utilization.

How were borrowed funds utilised?

Zambians are not against borrowing per se because whether at household, business or national level, getting loans is necessary at one time or another. The question is the purpose for which the funds are used for and how the purpose will facilitate the repayment of the debt. In the case of Zambia, there is no doubt we have borrowed money and a substantial amount has been used for wrong purposes. We have used borrowed money to pay civil servants salaries which makes up 52% of our annual budget, funded loss making Parastatals companies, funded bye elections and spent money on some infrastructure projects including creation of over 30 districts which have no direct bearing to helping us in the repayment of the loans as they are not income generating.

The major criticism of the PF government with regards to borrowing is that they selected projects in a populist fashion and wanted to implement so many projects in a very short period of time without analysis as to where the money was going to come from! The project management process was flawed. As Dr. Brian Chituwo, a former minister in the MMD government observed in the Post Newspaper of 28 July, 2015, “They tried to bring a populist type of governance. Was the public salary increment for public service well thought out? Were issues of creating districts well thought out and planned for, within ability of treasury to pay? Our country has been committed to massive infrastructure development as if Zambia is ending tomorrow. This is why we have development plans, we have vision 2030.We have a vehicle on which to ride in order to arrive at that vision”.

In selecting projects, it would have been prudent to do a proper cost and benefits analysis and those with high potential to generate revenue and thereby help with repayment should have been selected for funding through loans. It is the writer’s view that in order to avoid the risks of excessive borrowing whose consequences we are going to face, the recommended strategy for infrastructure financing should entailed for example, for Social infrastructure like health (Clinics, health centres, hospitals), education (Universities and Colleges), new districts and water and sanitation, the money should have been sourced from the mining industry’s taxes just like countries like Botswana and Namibia have done.

The reasoning is that these projects will not directly generate money to pay for the loan and so it’s better that there are financed from the people who are digging holes in our country so they leave a legacy of development when they leave and our people will benefit directly. I would have recommended funds to be spent on priority Economic infrastructure in sectors such as Energy, Agriculture, Tourism, Manufacturing to be financed by Eurobond as the appropriate source of finance.

This would have generated money, diversified economy and earned foreign exchange. Finally, for Transport Infrastructure like roads, rail, airports, they should have been financed by multilateral institution like the World Bank, African Development Bank, Industrial Development Corporation in South Africa, Development Bank of Southern Africa or through Private Public Partnership (PPP) or Bilateral or multilateral loans .This debt diversification strategy would have reduced the risks of excessive borrowing by minimizing amounts borrowed from Eurobond alone and achieved multiple objectives of employment creation, diversification of economy, foreign exchange earnings, at the same time improved social services etc .

Why is excessive debt going to cause Zambia problems?

Zambians including most of leaders in the ruling party do not understand why and how excessive debt will affect all of us very soon! The obvious simple reason is that we will need more money in kwacha terms to pay for the US dollar denominated loans due to kwacha depreciation. The payment of interest now and the setting aside of funds for payment of principal later (sinking fund) due in 10 years time will prove to be a major challenge even with drastic measures. The Government will need to find that money from somewhere! It is most experts’ view that the PF Government is unlikely to find the money for paying for these loans.

The reasons why the government will struggle to find the cash to service these loans are outlined below in a lay man’s language. In the technical language, the reasons could be referred to as risks why Government is unlikely to raise the money. In the event they put in measures to raise the money, it will require Zambians to pay through their noses by way of high taxes, high costs of essential commodities and poor social services. We will all be affected including the supporters of the archaically conceived, planned and implemented infrastructure projects which are one of the main causes of the economic problems that the country is facing now and will face in the future!

The following are the major risks which the Zambian Government is either incapable of identifying or are ignoring and unwilling to mitigate against in order to avoid problems of excessive borrowing in the immediate future:

Kwacha depreciation risk ( currency risk) – The loans we are getting are in dollars and so they will keep on growing in kwacha terms as the kwacha continues losing value against the dollar. To illustrate the point, our current Eurobond debt amount is $6.05 billion and at K7.50 exchange rate to a dollar, it is the equivalent of K45.4billion.When kwacha further depreciates to say K10.00, our Euro bond will be K65.05 billion kwacha which is an extra K20 billion! We will need more kwacha to pay for the same fixed dollar amount and the Government will need to raise more taxes and levies and we willall be affected! This effect has already started being felt from the raising of fuel levy and electricity tariffs!

Euro bond utilisation risk – The loans (Eurobonds) have been used mainly for social infrastructure such as health, education and water which do not generate income directly and so these projects will not generate money to pay for the loans contracted. The loans have been used for consumption like salaries and bye elections. It means that Government will have to raise more money from you and me through direct taxes like income tax and indirect taxes like VAT and non tax levies.

International interest rate risk – The Government has been able to borrow because the international debt market interest rates are so low but soon the interest rates will go up as the USA Federal reserve changes its low interest policy adopted after 2008 financial crisis technically called quantitative easing. Zambia will no longer be attractive to lend to by international debt market or they have to lend us it will at very high interest rates as we would be considered too risk especially having lost our good credit rating due to mismanagement of the economy. The implication is that we will either borrow at higher rates or we will have to run back to the hated IMF whose interest rates will be lower but the loans will come with strict conditionalities. And those old enough will remember the structural adjustment programmes (SAP) of IMF! It brought down the UNIP dictatorship through food riots in 1990 and prompted Lt Mwamba Luchembe’s coup attempt which shook KK to the core and brought us the democracy we are enjoying! It will not be pretty when IMF comes back!

Copper prices risk – This is the risk that copper prices are unlikely to improve substantially in the near future given the Chinese economy’s slow down to provide the required revenue to help service the debt. And even copper prices improve, as it has proved in the past, the improved copper prices will not trickle down to the economy in terms of more Government revenue. The Mining houses in Zambia call the shots as they decide what tax they are going to pay. The reversal of the windfall tax, the royalty tax and Vat rule 18 are cases in point. The mining houses in Zambia are the untouchables. Mining houses contribute about 12% to total government revenue whereas they contribute 45% in Botswana and 25% in Namibia. The mining sector’s Contribution to GDP in Namibia is about 12%, in Botswana 33% and in Zambia is about 5% at most! This means the burden of servicing the debt will fall on Zambians regardless of their political affiliation!

Foreign direct investment (FDI) risk – When a country has a heavy debt burden like Zambia and running a huge budget deficit, most foreign investors are edgy and they will take a short term view of their investment decisions and so we are likely to attract short term investors and not long term ones as they will want to avoid paying higher taxes when the investment incentives expire. We are only likely to attract those that will invest in short term and take advantage of the short term fiscal and tax incentives and after they have made their money in 5 years, they will pack their bags and go! The effect is that the investors will not contribute to Government revenue. We are likely to see less foreign direct investment and evidence is already there at Zambia development Agency. FDI have dried up and is impacting the kwacha.

Macroeconomic Management and Debt management risk – This risk is a major one! The PF Government has shown to be poor managers of the economy. This is likely to continue in the foreseeable future especially if they win next year’s election. The poor financial management of the PF and their populist policies are likely to continue. They have no political will to make hard decisions that are necessary to bring the economy back on track. We have a government that is denial of having caused the economic problems we have and whose obsession is politics and winning elections. They believe problems have been caused by external factors and not them and have not taken responsibility. They will continue not taking any meaningful action to mitigate against the risks alluded to above. The economy and the budget deficit will continue worsening especially as they are likely to spend big during the 2016 election year .The effects of the debt burden and poor economic management on the populace may only start taking its toll after the 2016 election.

According to Bode Agusto, the founder of Nigeria’s first domestic rating agency who set up the Nigerian government’s Debt management office (DMO) in the early 200s, “If you are going to borrow aggressively, you need a good DMO.” It is a fact that when a country enters the Eurobond market, disciplined debt management which is based on sound institutions to be able to manage the risk is crucial and Zambia does not have that.

How will excessive debt affect you and bring IMF back?

In the light of the risks outlined above, some of which even if mitigated against by good macro economic management, the Government will still be forced to raise more revenue to service the huge debt they have acquired as well as try to cut public spending. The measures are being postponed for now because of the election in 2016 but they will certainly be implemented after the 2016 election assuming the ruling party wins. In any event, regardless of whoever wins the election, they will have to bite the bullet! This will result in economic difficulties for all citizens – the unemployed, employed, businesses, street vendors, farmers, civil servants, villagers and even the infrastructure being constructed.

If you are unemployed, the indirect taxes like VAT, fuel levy and other levies will go up and make whatever you buy more expensive, if you are employed, you will pay more tax as pay as you earn, if you are a street vendor, your merchandise will cost more and your profit margin will be reduced and the demand for your goods will be less and you will go with less money home. If you are a farmer, the subsidies on your farming inputs may be withdrawn and you will not be able to farm and take your children to school. If you are villager, there will be no medicines in clinics, if you are a youth, there will be no jobs and no enough scholarship for college.

In light of the huge sums of money required to service the debt, there will be less money to maintain the infrastructure built and roads will start having pot holes and some structures will go empty and become white elephants as no teachers, nurses, doctors to occupy them. Initially, the Government will take some half hearted measures to avoid bringing the IMF before the 2016 election at all costs as they know that the IMF is unpopular in Zambia and elsewhere in Africa due to their history of inflicting pain on citizens because of austerity measures but things will not improve still.

The Zambian economy is likely to continue deteriorating for the rest of this year and into 2016 as any home grown measures will have little impact due to lack of confidence in the government’s economic management by financial institutions ,investors, capital markets and rating agencies. Zambia will be left with no choice but to go the Ghanaian route by calling in the IMF to stabilize the economy especially our currency, the kwacha if it continues depreciating.

The Government will only bring in IMF for the bail out loan after 2016 election. In the light of economic problems we have, an early election is a possibility so that the IMF can come sooner rather later to help stabilize the economy and give us more access to cheaper bilateral loans from the West. The IMF will be a necessary evil for a country like Zambia whose economy has been mismanaged. Ghana’s experience mirrors ours so well!

Ghana was the first sub Saharan African country to get a Eurobond in 2007 which it misused by taking a populist decision of increasing civil servants salaries betting on revenue from cocoa, gold and oil which never materialized! These commodities prices collapsed and their currency the Cedi depreciated by about 40% in 2014. Ghana was, therefore, forced to go to the IMF because of the ballooning debt, decreasing export revenue and collapsing local currency, the Cedi. They had to ask the IMF for help to stabilize the economy through budget support loans and to bring financial discipline as home grown Government measures were not having any impact- this is the price of being part of the international financial system and its ratings system!

Ghanaians started negotiating with IMF in September, 2014. Ghana’s powerful and high flying negotiating team was not led by the incumbent finance minister, Seth Terper, but the distinguished predecessor Professor Kwesi Botchwey, the architect of Ghana’s economic reforms programmes of the 1980s! (This is a good lesson for Zambia). And in February, 2015, they got the $918m bail out! The deal Ghana and IMF agreed was good in the sense that it protected social spending. The President of Ghana, John Dramani Mahama had specifically instructed the Ghanaian negotiating team to ensure that the deal achieved the twin objectives of macro economic stability and employment generation growth! This was smart politics. Zambia is unlikely to negotiate such a deal with IMF as PF has an attitude of not calling on Zambian experts if they are not cadres of the Party. As we all know, they have a very poor quality team in house.

The IMF will come with harsh conditionalities. The IMF will start running our economy again like in the 1980s and 1990s. They will come and implement austerity measures to reduce Government deficit which the PF would have failed to on their own due to lack of political will and their populist stance. Zambians should expect cuts in health, education, removal of subsidies on agriculture, freezing of civil service hiring, cut in civil service salaries and increase in taxes. And Lord behold, the Greece debt crisis experience will be upon us!

There is no doubt that this analysis will be dismissed by the Government and its the supporters as being alarmist and the author labeled as a prophet of doom mainly due to ignorance as well as politicking. Lest people forget, Finance Minister Alexander Chikwanda warned sometime ago about tough economic times ahead without elaborating , I am simply putting his statement in the right perspective. What should not be in dispute, however, is that smart management at company or national level demands planning, analysis, risk assessment and mitigation and forecasting to make informed decisions rather than fire fighting, ad hoc and knee jerk approach which is more costly.

There are many analysts and commentators who have advised Government to start taking measures to reduce the budget deficit especially but because of the PF’s obsession with winning 2016 election, nothing meaningful is being done. The Bank of Zambia Governor Dr. Denny Kalyalya has made his views clearly, although in a technical language, by stating that fiscal measures are required to complement the monetary measures but we are not seeing anything meaningful. One would have expected a statement from the President to that effect given that we are part of the Eurobond market to calm the markets down.

The lack of message from the highest office is what Christine Largade , the managing director of IMF was partly referring to about African countries not understanding the international financial markets! The statements from Government spokesman or from Secretary to the treasury are not taken seriously and do not carry the same weight as that of the President of the country. The short of it is that Government expenditure has to be drastically curtailed immediately and other measures of increasing revenue taken as well overhauling of the financial management system in government and bring in financial discipline. In short home grown economic reforms are required!

My advice to Government is to postpone some projects or cancel some projects altogether, look for alternative sources of income; reduce recurrent expenditure and stop populist expenditure for winning next year’s election. These measures need to be communicated to the market. I also advice that they consult former MMD Government officials who ran our economy better and names that come to mind are: Dr. Brian Chituwo, N’gandu Magande, Situmbeko Musokotwane, Caleb Fundanga, and other technocrats especially those who served during the Mwanawasa administration to help the Government with the economy and sort out the impending debt crisis! Mark my words; this is an accident waiting to happen!

I would lastly advise President Lungu to consult his counterpart in Ghana, President John Mahama Dramani on how he handled the economic crisis because their problems are a mirror image of ours in that they had energy crisis (shortage of electricity), falling export revenue from Cocoa, Gold and Oil and a depreciating local currency, the Cedi. Ghana is now on a recovery trajectory. He can even consider sending a team of experts there! It will be money well spent even better than some of the foreign trips that he and his delegations have understaken in his first seven months ! We are in knowledge century and so we need to be smart and not reinvent the wheel!

The writer is a Chartered Accountant by profession and a financial management expert. He returned back home two years ago with a hope of contributing to the country through rational economic debate based on his exposure and also by using his entrepreneurial skills to invest in Zambia. He has lived in the diaspora in England, South Africa and Botswana for over 25 years and most of that period as owner of Media, Finance, Manufacturing and Consulting companies. He is an independent and non partisan commentator.

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35 COMMENTS

  1. The article’s size is like reading daily Times and post news papers combined. I will finish reading it next week and comment then not now.

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    • This has been put straight on the face of PF and its supporters that it was not possible to borrow our way out of poverty at the rate of borrowing PF has introduced in our country. PF has no solution/s to what they have created, things will only get worse with time.

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    • Breaking New: PF have finally decided to give Edgar a “Vision”. They will have that written for him in a revised manifesto. ..and surprise, surprise, according to PF insiders, Edgar will take take action against a free falling Kwacha to morrow by declaring K1=$1

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  2. Zambia will remember Sata as the destroyer of the Nation!

    He sold the whole country just to pay for his own personal medical costs!

    And ignorant Zambians buried this THIEF in Embassy park. His remains should have been thrown down the toilet!!!

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  3. This is great article. I wish politicians running our government could read this. Their arrogance has blinded their minds from seeking advice on how we can come out of this mess. Debt is not something we can take lightly.

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    • Nice and educative article indeed for the wise to begin realigning policy. However due to who is privileged to access it our relatives and friends without this privilege in rural areas have already missed out on this kind of enlightenment! I wish the many community radios could break it down into simple language or even translate it so as to reach many around the country.

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    • Alexander Borrower Chikwanda needs to be taken outside and SHOT!

      For treason and selling our children into slavery!

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  4. Kalima Nkonde: He returned back home. I doubt if you can run a company. Try to register one and your volumes of theory will make nothing move.

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    • This is not theory unfortunately. We borrowed our first K45.4billion equivalent Eurobond when the kwacha was trading at K6.25 to a dollar and we were supposed to pay back at that same dollar rate. Currently the kwacha is trading at K9.08 to a dollar. This means that at the current exchange rate, our Euro bond is K65.05 billion kwacha. This means we will pay an extra K20 billion when the time comes to pay back! We will need more kwacha to pay for the same fixed dollar amount and the Government will need to raise more taxes and levies and we will all be affected! Do you understand now mambala iwe?

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  5. There is no doubt that this analysis will be dismissed by the Government and its the supporters as being alarmist and the author labeled as a prophet of doom mainly due to ignorance as well as politicking.


    I just don’t like people wHo write like this no matter how well thought their article!

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  6. Great article from one Kalima Nkonde, Keep it up brother! As usual government will only discard the article and it will be business as always to win elections. But i quote, the economy is not stupid. The president has had numerous visits to Solwezi but what has been the results of late? People are still complaining because of the economy no wonder he was booed because someone is not advising him well.

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  7. @Kalima Nkonde, “returned back” is not good English – just remove “back” next time! Being in full control of your grammar enhances your credibility, especially when you are presenting such an important article.

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  8. Its interesting to note the kind and quality of comments being said on such an educative article- no wonder it took close to 30min to see the first comment and I doubt we will see many more. If it was one of those political stories worse still with connection to an adulterous affair, comments would have started flowing before the article finished uploading. it just shows our level of analysis as a citizenry and we need to improve if are to make sound judgment on national matters in an objective and informed manner. It appears we are the kind of people who thrive on hear say (kwalola mwela) and will never make up our minds based on facts presented to us and as such we are forever blindfolded. Thumbs up to the author for giving a free lecture which has unfortunately hit dumb ears!!

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  9. This is the real Kalima not that drab about ECL’s achievements in the last article.
    I can’t wait for Sunday Chanda, Kennedy Kamba, Mumbi Phiri & Chishimba Kambwili falling over themselves trying to explain this away.
    This is the level of mediocrity Jameson has reduced us to.

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  10. Good article Kalima. Well said. What you have highlighted has started playing out already and will become more evident in the months and years to come, especially as the kwacha weakens. The infrastructure projects were driven by PF desire to steal. In some infrastructure projects cement was being quoted at K300 per pocket instead of K70 per pocket! Prices of other materials were also being exaggerated to finance corruption. It is a disaster bwana! To imagine that Fred who has been to school played a big role with his Post newspaper to deceive Zambians and brought this disastrous situation to our country is very annoying! May be this is what Zambians deserve, since it appears they never learn!

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  11. Probably only 20 % of electorate understand this, the rest just need chibuku to fill their hungry bellies and you get their vote. PF know this and the next eurobond has come just in time to buy the pipo buckets of chibuku while they pay them selves from building the most expensive roads in the world payed for with the same eurobonds.

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  12. Well done sir.Please send this directly to Mr Chileshe Kandeta and Hon. Kasonde, finance minister for their input in planning meetings as they ignore private media.This article is educative and plse keep informing the nation economically
    PM

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  13. well thoughtful and true events which will or unfolding in our country,pf should stop taking pleasing projects which will hurt us very soon.if u love your children u can not position them in a trap which will be misery to them,we are all gone to die but zambia will remain ,how are we going to be judged.ECL is a let down bcz he is a post independence president but he is worse than sata.
    *some bloggers on LT are paid by pf,i hope u are using the funds for your education.unfortunately some of our people do buy the nonsense which these paid bloggers put forth which results in electing mediocre leaders thereby making zambia look like a war tone country.

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  14. Unfortunately this borrowing is found in many Zambians who borrow because a loan facility is there. Paying back is another issue. KK started this trend and it has continued. Some of us don’t understand that when you borrow you should have the capacity to pay back whether it is to an individual or to a bank. People getting loans to have plush weddings. They start their marriGes in nkongole then quarrels start! We should learn to live within our means and not want to be like the Joneses!

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  15. Borrowing is never a problems at all. The problems is how the borrowed money or property is used. The biggest problem Zambia has is that she has very few individuals with the capacity to finance their own business and then contribute to the national income through tax. It is the sole responsibility of any reasonable government to help its people improve. Unfortunately is was over borrowing, if it was not, the intention of Sata to build roads in Zambia was great and it will surely benefit any wise person. The economy of our country is to be build on the small business that the majority can do. The improved roads has surely woken many domant people to start contributing to the wellbeing of their families and the nation as well. The very Chinese economy we acclaim never started with…

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  16. This is a great article but there are people who will just tell you that when the sun sets in the evening,there is no diference with sunrise in the morning..typical PF.

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  17. I read the article and it answers most of my questions especially how a reckless outfit of Edgar & Co successfully managed to obtain such a huge figure again…its also scarily to also learn that there are no conditions placed on these selfsame loans. It is likened to asking an alcoholic friend to safe-keep a case of spirits for your wife’s surprise party and expecting to find all bottles intact…the recklessness of this govt is evident in its continuous creation of districts and appointing of 33 DCs this week with no care about expenditure.
    If only Edgar would only also use his powers as head of state and invite such professionals to advice him instead of surrounding himself with greedy vultures…. one Paul Kagame is not ashamed to ask for economic advice from international economist…

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    • international economist & consultants like Dambiso Moyo as it in his country’s interest.

      Nice work LT keep it up..more informative articles like this; I suggest you pin this one for at least a week before moving it to the archives so everyone could at least have a read.

      I will definitely look out for this author’s articles!!

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  18. GREAT ARTICLE AND EXPLANATION. WE HAVE BEEN RAISING ATTENTION TO THIS SITUATION FOR MONTHS NOW. GOVERNMENT NEEDS TO PRIORITIZE IN ITS SPENDING AND STIMULATE ECONOMIC ACTIVITY IN SECTORS THAT SHOW IMMEDIATE JOB GROWTH AND IMPROVEMENT IN SOCIAL WELFARE. OUR MONETARY POLICY NEEDS URGENT SURGICAL ATTENTION. ONE WAY TO STIMULATE INVESTMENT, CREATE JOBS AND ARREST INTEREST RATES AT THE SAME TIME WOULD BE TO PROVIDE GOVERNMENT BACKED FINANCING WHICH IS FUNDED BY THE PRIVATE SECTOR. THE GOVERNMENT CAN IDENTIFY INDUSTRIAL ACTIVITIES THAT CREATE EMPLOYMENT AND ENCOURAGE THE PRIVATE SECTOR TO FUND SUCH PROJECTS AT GOVERNMENT APPROVED RATES IN RETURN THE PRIVATE FINANCIAL INSTITUTIONS WILL HAVE GOVERNMENT AS A FINAL GUARANTOR OF THESE LOANS SHOULD THEY DEFAULT. THE ENTREPRENEURS WOULD IN RETURN…

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  19. THE ENTREPRENEURS WOULD IN RETURN ADHERE TO GOVERNMENT STANDARDS OF ACCOUNTABILITY. ITS TIME TO REDUCE THE USE OF FOREIGN EXCHANGE FOR NON ESSENTIAL IMPORTS. E.G) IF YOU WANT TO DRINK AN IMPORTED BEVERAGE FINE BUT JUST KNOW IT WILL COST YOU SIGNIFICANTLY MORE THAN SOMETHING MADE BY ZAMBIAN COMPANIES.

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