Thursday, March 28, 2024

Zambia is in a Debt Crunch

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Lusaka City

By David Kapoma Governance Activist

I note with concern the lack of a clear strategy by the government on how they intend to repay the Eurobond. The only thing the government announced last December was a creation of a sinking fund. Until now we do not know how much has been raised and what has been paid back towards the bond.

Today, the interest rates are at their highest in more than a decade and our inflation has gone haywire. In short our government is broke and nobody is talking about the Eurobond as a major concern. The government is living beyond its means and those close to power are too comfortable to notice that our economy is collapsing.

Just to provide some background regarding this situation. Of all the governments that have been in power, we have accumulated more debt in the last 5 years than ever before. This is also owing to the fact that the country’s economy is under intense pressure from global factors. At the point of leaving office, Dr. Kaunda left a debt of USD 7.1 billion which was inherited by the MMD. President Chiluba left USD 5.6 billion, late president Mwanawasa left 2.6 billion, president Banda left only USD 0.5 billion, late president Sata left USD 7 billion for the 3 years he was in power and finally the current debt stands at USD 9 billion under president Lungu. So far the PF has not demonstrated any willingness to pay off the debt as it was with the MMD when for former ruling party formed government.

In the recent past the PF government issued Eurobonds of USD 750 million at 5.38 percent interest per annum, followed by USD 1 billion at 8.5 percent interest per annum and USD 1.2 billion at 9.74 percent interest per annum. This means that our minister of finance needs to find USD 247 million per annum or USD20.6 per month to service the debt with just these 3 loans. The current debt the country has means that every Zambian citizen including children has a debt of approximately USD 800 that we need to pay.

Our inflation rate on food today stands at nearly 26 percent and it is expected to worsen by further 7 percent by the time we get to the last quarter of 2016. The salaries for civil servants and those in private companies have not been increased to match with the increase in inflation rates. This means that most people’s salaries have been reduced by about 26 percent in real terms. Taxes on the other hand have not been reduced to cushion the impact of current economic recession.

The amount of money our government has borrowed has put our treasury under serious financial stress. Our government is currently borrowing without caring about how the debt will be paid back. What is even more painful is that most of these loan proceeds went to road construction projects with contracts awarded to foreign companies (mostly Chinese). This means that the majority of this debt has left our country in payments to road contractors. I may not be wrong to conclude that Zambia is borrowing to develop China and again we go back to China and ask for assistance. Our country will for a long time continue servicing the debt that has actually gone to further develop China.

Our national services is well positioned to do these roads and ensure that the funds for road construction remain in our country to deal with the increasing poverty levels currently standing at 76 percent. Our universities produce engineers but we do not make use of the skills acquired.

One would have thought that when we are at the brink, we would see the bigger picture, be humbled by the reality and live up to our responsibilities. This reality should be reason enough to promote unity among political players to bring about solutions in the interest of Zambia. In the meantime however, both the opposition and ruling PF have not shown leadership in trying to come up with solutions, but instead they divert our attention by blowing petty issues out of proportion.

It is upon the president to ensure that confidence returns among the Zambian people and to the Zambian economy. President Lungu MUST provide a clear road map to put Zambia on the path to sustainable and equitable growth. At a point like this, the opposition should stand ready to support measures that will steady the economy and avoid unnecessary criticism. As citizens we must also be ready to support a growth strategy that takes Zambia where it belongs. We should demand a plan that creates a convergence; with productivity, job creation, fairness and inclusivity at the centre of our growth agenda. President Lungu should provide Zambians with a credible course for a stronger and better future.

The PF must show Zambians that they care. The government must think of the families thrown into uncertainty because their bread winners, serving our country in civil service cannot be paid on time. Think of the thousands of suppliers of goods and services to your government whose businesses are collapsing because they have not been paid.

The PF must tell the Zambian people where there are taking us and how they intend to get us out of poverty. They should not wreck the nation, otherwise the ending will be a bad one. The PF must take responsibility and should not underestimate the urgency of the situation Zambia faces. Do not underestimate your imperative to act. Please get up, report on duty and sort out the mess.

41 COMMENTS

  1. We have no idea how we will pay the Eurobond back or where the money will come from. All we want is to continue ruling Zambia so that we can build expensive roads from which we will make money for our families. That’s enough for us.

    • Governance Activist, my foot! He is too shallow to give real analysis. To compare date of the 80s when our economy was very small with a population of under 8 million and the current economy that has greatly increased and it’s population almost double of 1990 is not only petty but deeply shallow.
      Besides much of the money has gone into infrustracture.
      If that is having no plan, then I need to be educated what the word plan means. Roads, schools, clinics are not play parks but pillars of any strong economy, be it mining, agricultural or tourism. PF is heading in the right direction on this one.

  2. LT, where do you get some of these shallow columnist with a gloriously useless title. So, according to this Governance activists, RB who only ruled for 3 years is the greatest President Zambia has ever had because he left the least debt. Really, does that argument even sound logical to your self?

    If we take you argument further, it means the worst country is the one with the highest debt and that would put a significant number of developed countries like US, UK, German, Japan in the worst countries group. Does that still make sense to you?

    I can’t spent the whole day writing nonsense like that and emotionally riding on an argument without stopping to think about the size of the economy and what it is producing. How shallow can you get really?. I rest my case

    • Get out of bed, (at least) wash your face, brush you teeth and then have some breakfast before rushing to the comments section of LT. Where has the author, according to you, referred to the greatness of any of our presidents, past or present..!?

    • Maybe work out the difference in debt at the beginning and end of term to see who was a more effective president. By the way, all the countries including the ones you mentioned have debt. It’s not really about how big the debt is necessarily, but whether you can make repayments.

    • Ba Bootlicker,
      Note the following:President Lungu MUST provide a clear road map (which is not apparent at the moment) to put Zambia on the path to sustainable and equitable growth; the opposition should stand ready to support measures that will steady the economy and avoid unnecessary criticism. Also the PF must show Zambians that they care and DO think of the families thrown into uncertainty because their bread winners are not be paid on time; and show HOW the thousands of suppliers of goods and services to your government whose businesses are collapsing WILL BE paid.

    • The point is that the Government has no plan to repay the debt. The worst case of Zambia is that they borrow for consumption and not for money generating activities like the energy sector.

      America has highest debt, but the difference between America and Zambia is that they borrow to generate income and Zambia borrows for consumption (doesn’t generate income).

      I can further say, the lower the debt Zambia has the better for the country. What the governance activist is saying is actually true.

    • LPM left $2Billion reserves in the Treasury. RB & Sons started the depletion of the $2Billion & MCS finished off until he started the borrowing spree.

    • THAT’S WHY I LIKE READING MMD CHIEF BOOTLICKER. THE MAN THINKS DEEPER THAN JUST MERELY READING THE COLUMNIST ARTICLE. WHAT BOOTLICKER HAS WRITTEN ARE THE FIRST THINGS THAT CAME INTO MIND ESPECIALLY, THE COUNTRY’S DEBT OF WHICH ZAMBIA’S IS JUST NOTHING AS COMPARED TO THE US WHO OWE CHINA AND SOME ‘SAUDI ARABIA’ COUNTRY BILLIONS AND BILLIONS. TO AVOID DILUTING BOOTLICKER’S CONTRIBUTION THOUGH I WAS ALSO THINKING ALONG THE SAME LINE, I WILL NOT WRITE IN RESPONSE TO THE WRIER. I WOULD RATHER LET MMD CHIEF BOOTLICKERS CONTRIBUTION STAND OUT.

  3. Well said Mr. Kapoma. Tell them to tell us where they have taken the money. We need brave comrades like you in Zambia

    • The posts have started with mmd bootlicker, jkalusa, techilema, kudo avatar and others using Lozi and Tonga pseudonyms will shortly follow demonizing HH-UPND….watch the cheap propaganda

  4. PF strategy over this ominous expose will be to:

    1. say debt is global
    2. that the GDP can handle it
    3. that the kaloba debt will be repaid from the infrastructure in some far place of Muchinga etc
    4. that HH is the one who procured the debt
    5. that the USA and Japan debt is bigger than Zambia
    6. that all querying debt are jealous, bitter and Tonga

  5. Nothing wrong with borrowing as long as the money is channeled towards infrastructure development or its intended purpose.
    That being said, this is an emotionally charged and poorly written essay with no (economic) facts to back up the claims.

    • You are PF. Truth is road construction is not development but a small part of it. Is Zambia a developed country now that we have roads? Prioritising one sector is ok to bring about development but starting with roads is wrong. Productive sectors like agriculture or industry are the ones that can bring about development in Zambia. Investment in agriculture will increase demand for irrigation and associated equipment, fertilisers and seeds, roads, and communication and stimulate greater investment in these industries that produce or utilize them while at the same time create employment in both the stimulant and stimulated sectors. Alternatively, investment in power generation would make available cheap electricity and this electricity is expected to encourage the growth of small scale…

    • ……… industries, irrigation works and thus in the end stimulate the growth of the agriculture and the roads sub sector. It is this process of sector linkages that any Govt must exploit and not investment in roads and football stadia.

  6. Why do we work ourselves up? The truth is we are in debt, there’s no mealie meal, no fuel, loadshedding is here, there are no jobs, the few with govt jobs get very little & get it very late.
    We can kick each other all we want but the thing is we have a “father of the nation” & the bum is snoring after getting drunk on the kaloba he got on our behalf.

  7. Only a person that has no heart for Zambia will attack you my brother for stating the facts as they are. Ignore those calling you names. It’s because they are feeling the heart. It’s not your job to justify government careless expenditure. Days are numbered. Well said Kapoma.

  8. The columist is indeed shallow. Firstly he tells us that he doesn’t know whether the funds are hitting the sinking fund account and he goes on with bitterness to condemn Pf govt. Why not first do a research at mof and then come up with a well informed mind to tear apart govt. Its only shallow Tonga Upnd vuvuzelas who can buy this full article.

    • As predicted HH Techilema and crew have started:

      – diverting from facing the temerity of their incompetent unprecedented borrowings
      – using emotional words (PF campaign strategy) of tribal, bitter, hatted
      – labelling anyone who does not agree with them and/or criticizes them as Tonga ( a euphemism for all other tribes other than Bemba and Eastern….its a term they use to belittle the rest of Zambia that is not PF stronghold)
      – they then say this unprecedented corrupt borrowings are for development arrears

  9. HH Techilema if the auther has lied what about you telling us the truth with regards to kaloba since you are a pf vuvuzela.

  10. PF fellows, argue on the substance by the author. Indeed we are enriching chinese, our economy is shrinking, govt is broke, salaries are delayed, students did not receive meal allowances normally, failure to start Zambia airways, mulungushi textiles, poverty is increasing, Zambians are more hungry than before, zambians are walking more coz no money for ka bus fare

    • The real benefit of a good road is not to a contractor, but to the many users of the road that is mainly zambians and not Chinese. If he roads were being built in China like the British used zambian copper to build roads in Harare and London that would have been a different situation.

  11. The column is an assumption and it lacks the basis to determine if Zambia is in a debt crunch or not (Perhaps you should research more on what it means to be in debt crunch). You have no facts and i have not heard from Government treasury confirming that we are in a Debt crunch.

    In research we don’t just accept rhetoric statements without facts and findings to ascertain your statement sir. You need to research and then come back with findings proving your column.

    Thank you

  12. …the question is…how many of the majority of voters know about the author’s views…??…after the death of LPM, sympathy vote ushered in RB to power so did ECL after the demise of MCS…but this time around, frustration among Zambians may usher in HH…but soon history will made 3months after ascending to power, HH will handover power back to ECL to deal with the mess the author has highlighted…..

  13. Shallow political column. Its one sided and fails to recognise other cardinal factors. Bad figures are exaggerated e.g inflation is not at 27% but at 20% .national debt is now sitting at under 6 billion and not 9 billion. Also the writer fails to recognise the fact that there has been a lot of spend on infrastructure which was much needed. I agree that the process could have been done better and cheaper bit perhaps the writer can research that and writer a more informed article. The article above is full of guess works and exaggerations. A little advise to LT. Please read articles before publishing

  14. No matter what we think about the columnist opinion, zambia is seriously indebted. Whether we insult each other here and there, the reality is that we are owing big time. If nothing is done about this we’re doomed.

  15. READ THIS EXAMPLE: ” YOUR MOTHER FOR VILLAGE DEAD CAR AXIDENT, PLEZ RASH FAST FAST ” . Now whether the message is poorly written, the communication has been delivered. Stop analysing the messenger but instead make your decisions. After all, it’s now vividly clear that bafikala balakwata nama PhD without ka G12… Viva columnist.

  16. LOOK AT THIS WELL ARTICULATED ANALYSIS, YET SOMEONE STILL WANT TO PRAISE THESE LOOTERS IN PF GOVERNMENT. LUNGU AND HIS GROUP ONLY CAME TO POWER TO WINE AND DINE, NOT TO BUILD THE ECONOMY OF OUR COUNTRY. WE ARE TO BLAME AS ORDINARY ZAMBIANS IF WE STILL ALLOW LUNGU AND HIS LOOTING MINIONS TO STILL RUN THE AFFAIRS OF OUR COUNTRY AFTER AUGUST 11. LET US VOTE FOR A MORE CREDIBLE UPND TEAM. THEY SEEM TO BE MORE HONEST THAN THESE PF THIEVES WHOM WE HAVE ALL SEEN PLUNDER OUR COUNTRY. LET US ALL JOIN HANDS AND HELP REBUILD OUR COUNTRY BY VOTING FOR HH AND UPND. ZAMBIA FORWARD.

  17. Amaizing how any messege saying that things are bad and getting worse is music to UPND chaps. can you now celebrate the eviction of your Veep from a 5pin house

  18. The potential in GDP growth revenue does not only sit on Zambia’s internal growth Look at it from the regional perspective

    For instance the attractiveness of Zambia for those of us in touch with world class investors has made Zambia an attractive investments with a golden eye to Congo making it potentially effective to be CREATIVE so and tap in the potential that SA has managed even when far away from Congo The nearer now better accessed is Zambia and potential revenues across National GDP is quiet high for those with eyes and acumen Zambia is a transit economy into Congo and not a closed economy 3 Billion Bonds is too little to call looking…

  19. at the potential in revenues and industrial effect to Congo Zambia in terms of business accessibility and nearness to Congo as new frontier in mining makes sense to invest in potential revenues within and mopping out the Congo

    What rather you should be doing is to promote Zambia as a most preferred investor destination with focus and markets to congo

  20. The message is clear and educative. Why hero worship even when things are not in order. Let not remain docile things are not well in Zambia. We should encourage the power would be to work on the exchange rate and bridging down inflation. Don’t encourage foolish things to continue. People used to her worship KK and no one was courageous enough to tell him his wrongs, this is the same spirit prevailing in Zambia. I say that the economy is bad, am rabbled of being opposition. The truth will remain you accept or not, the power would be need to do something to put our economy in order. Those educated but go on praising wrong things are the ones killing the economy further

  21. very suspicious and misleading statistics. In 1960 Northern Rhodesia GDP was US$0.5b when Zambia became independent our GDP was US$0.68b; by 2014 it was US$27.7b. by 1991 when FTJ was taking over the GDP was US$3.4b. if our National Debt was US$7.0b. thats twice the GDP. from 1991 to 2011 when MMD left office they had grown the economy by over US$20.0b. LPM by US$10b and RB by US$9b. the PF has done US$5. as a percentage of GDP the PF debt is not even scary its not even a third of the debt. according to the 2011 Budget presentation Zambia’s Debt was 15% of GDP, how could it have been US$0.5b??

  22. The debt ceiling is not the case for Zambia alone even in the US debt ceiling has often been an issue ,always the ceiling being raised and the can kicked down the road ,in most cases the problem is that the preventive measures “‘fit in and align”‘ is left too late to call ,until when its spent and people see the hole and needs to be repaid
    I think the law passed by parliamentarians will be important to see the seal the void and avoid raising the ceiling always as the easier way to finance We see the debt ceiling staying manageable and i think it will not grow to those levels and be kicked like a can in rollover style A clue will be to look at it government…

  23. treasury structure now You will see that there has been steps already to ensure that its stamped and is not defaulted For instance look at pension restructure and treasuries ,if you are a careful reader with thought you will see through including the provisions on Gov. Accounts
    You operate in a corporate environment ,you cannot operate like a corporate and be the same as a capitalism The two are not synonymous. In short capitalism often fails, and then capitalism without failure is like Catholicism without sin One needs to exercise prudence and wisdom It will not be simply heaven suddenly

  24. At least the Zambian debt portfolio is credit quality comparable to the peril shown in our neighbours ,Mozambican in tuna bonds be thankful where you can and see where you can and say at least the portfolio is well balanced and there is space to contain and restructure appropriately

  25. Well written article. I prefer the factual rather than the subjective points, but the information given is pertinent. 226 million kwacha per month is no joke. Neither is ~80,000 Million kwacha of debt, especially given the concerted efforts of the last governments (mmd) to lower and repay the same.
    It’s almost like 25 years of slowly saving has gone to waste.
    Roads are a nice aesthetic legacy. hopefully they don’t pothole soon.

  26. David you are absolutely correct to be concerned about our country because politicians are mere ordinary people that come and go, except that the decisions they make on our behalf, and the consequences thereof, are borne by the citizenry. The contrast between FTJs new ‘kacha’ admin and ba Levy’s new deal admin is a classic case.
    IMF has been asked by the PF admin to only return AFTER the August elections, to implement the austerity measures it recommended in their last country visit; so it will be interesting to see how, if UPND wins, will renegotiate this economic crisis and high indebtedness.

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