By David Kapoma
On July 28, 2015, the government through the Minister of Information and Broadcasting Hon. Chishimba Kambwili announced at a press conference in Lusaka that cabinet had approved the creation of a sinking fund “the fund will help to ensure accumulation of resources for the repayment of the bonds at maturity. The move will reduce pressure on the national budget and mitigate against foreign exchange risks.” Mr Kambwili said the establishment of the fund will also ensure the credibility and integrity of the country on the international capital market.
Going by the words of the Minister of Information and broadcasting at the time, it is clear that government had good intentions and meant well in creating a sinking fund. If this fund is managed properly, the country may not feel as much pressure when the repayment time for the loans come.
The dictionary defines a sinking fund as “money served by a company or government for the purpose of loan repayment.” Other definitions states that “a sinking fund is a means of repaying funds borrowed through a bond issue through periodic payments to a trustee who retires part of the issue by purchasing the bonds in the open market. Rather than the issuer repaying the entire principal of a bond issue on the maturity date.”
A sinking fund is public fund which the citizens must have full information about. We the citizens must monitor how the funds are accumulating and ensure that such funds are protected from abuse. This is a responsibility of every Zambian regardless of one’s political affiliation. As it stands, we can only monitor the growth of this fund through the minister of Finance. This is a very important project which the government must treat with seriousness as it has the potential of reducing the burden on the treasury when we start repaying the loans in 2022.
I am however, concerned with the loud silence from government regarding this fund. The newly appointed minister of finance has said nothing about it, not even in passing. It is common sense that the idea of using Zambia Railways as a major contributor to this fund did not work as the company is still struggling despite government pumping in millions of dollars. We are at greater risk when government decides to remain quiet regarding the issue of the sinking fund. We may just realise that the facility was in fact never created and no money has been served.
Zambia’s current total public debt stands at $9.75 billion dollars. The debt is made up of $6.05 billion external debt and $3.7 billion domestic debt. The total public debt has increased from $3.5 billion in 2011 to about $9.75 billion today, an increase of 176 percent. It is good however that government realised how huge the debt is and came up with the idea of creating a sinking fund which in my view and I believe the view of many people is the safest way to ensuring that the country is prepared to pay the debt in the next few years as pre-conditioned.
Having said that, I wish to challenge the Ministry of Finance through Hon. Minister Felix Mutati to provide the nation with a report on how much has been served, where the account for the sinking fund is held and how safe the fund is from abuse by government. With the current financial situation, it is very tempting for the government to touch on such money, a development that may injure the country’s economy even worse in future. Government must treat this matter seriously and ensure that the country does not find itself in a situation where paying back the loans becomes a mission impossible.
WHERE IS THE SINKING FUND?
God bless Zambia