By Dr Nevers Sekwila Mumba
The recent announcement by the IMF that they will not bail out Zambia with an estimated $1.3 billion loan did not come as a surprise to us. This was because as we have shown several times before, the official debt position of $7.5 billion as announced by Finance Minister Felix Mutati in Parliament before the whole world is a big blue lie.
Back in July, we produced an analysis to show that using figures from the Ministry of Finance itself, the total debt position, including local debts is at least $23.4 billion and is at risk of reaching $31 billion very soon if the PF get their way with new loans they are currently seeking. The external debt component of this is not less than $16.6 billion, factoring in debt repayments of the principal amount which so far total $888 million and 2017 debts estimated at $4.2 billion as of July 2017.
The IMF is aware that the external debt of Zambia is unsustainable and has reached a level where the Zambian economy will be under tremendous stress in the coming months. The fund has repeatedly advised the Minister of Finance to place on the table a proper plan on how he intends to correct the ballooning debt.
The IMF already knows that the Minister of Finance lied to Parliament and the world when he under-declared the national debt stock. This singular act is enough to cancel the discussions for a further loan facility with the IMF.
Mozambique suffered the consequences of lying to the IMF when it contracted $2 billion of secret loans of which $500 million vanished into thin air and obviously lined people’s pockets. After the lie was uncovered, donors suspended aid to Mozambique and the country defaulted on its debts.
So the announcement by IMF that our current relationship with them is tenuous was fully expected by us from 6 months ago. While politicians may lie during their political campaigns, the economy is a different field which operates on the integrity of numbers. As they say, numbers don’t lie. The numbers clearly show that Zambia is on a path to a sovereign debt default within 3 to 5 years and the corruption in the PF has worsened our prospects of quick recovery.
We wrote to the Minister of Finance earlier this year and sent him a verified breakdown of our debt analysis and debt repayment schedules for the past five years. He has not refuted the authenticity of our calculations.
There may be a variance of even a billion dollars on either side of our number, but what is true is that the figure of $7.5 billion from the minister is a pure lie. If it was not, the IMF would not have said our debt is unsustainable as this number only represents about 33% of our 2017 estimated GDP, well within normal borrowing limits. The big question is, why is the minister lying about the debt stock? To whose benefit is he lying? Are we seeing parallels to the Mozambique situation? Are millions being secretly siphoned out of the treasury through corruption?
The Finance Minister needs to come clean on the true debt stock as revealed by his own Ministry figures and place on the negotiating table a program that outlines a change of approach in regards to borrowing. The answer to all these stress levels lies in the PF government drastically reducing public expenditure and arresting theft and corruption.
The PF government has been on a long spending spree, buying rubbished second hand fire trucks for a million dollars apiece and overpriced ambulances for over a quarter million dollars each.
In 2011, PF inherited from MMD a small $3.5 billion debt position with debt servicing at 3.5% of domestic revenues. Total loans contracted by MMD were a tiny $504.8 million which ballooned to $1.31 billion the very following year in 2012 under the PF.
The PF are the most fiscally reckless government in Zambian history and stopping this senseless spending must be a precondition to any continued talks with the IMF. Under the prevailing circumstances, the PF government will have a tough time to convince the IMF with such a hidden, mysterious debt undisclosed.
Attached are some charts we constructed using data from the Ministry of Finance Annual Reports 2011-2016 (with our own 2017 estimates) and the government Yellow Books 2011-2017 (attached also is the list of new loans 2011-2016) so that Zambians can see for themselves how their leaders are lying to them and the whole world without shame.
1. Ministry of Finance Annual Reports
2. State loans at heart of Mozambique debt scandal
3. World Bank sees faster GDP growth for Zambia, warns of rising debt
4. World Bank Zambia Data
5. IMF 2015 Zambia Debt Sustainability Report
6. Zambia has highest debt in Sub-Saharan Africa – IMF
7. Zambia’s Hidden Debt Crisis: Part Two
8. Zambia’s Hidden Debt Crisis: Part One