International Trade and Business Consultant Trevor Simumba has warned that Zambia is at great risk of an economic shutdown if definite actions are not taken by the Government.
And Mr. Simumba says the Ministry of Finance should stop being defensive about Zambia’s growing debt
Mr. Simumba has also charged that Ministers and other technocrats are not telling President Edgar Lungu the truth regarding the state of the country’s economy.
In a series of tweets, Mr. Simumba said even the official reports from the Ministry of Finance on the economy is full of inconsistencies.
“Looking through the 2017 Annual Economic Report, it seems Government is now borrowing from other banks to pay the 15% upfront counterpart funding that China requires when it provides loans. Three Loans amounting to $145 million have been taken by GRZ in 2017 to pay for the 15% counterpart funding required by China and India for the following projects: Star Times ($41 million), Industrial and Commercial Bank of China for the Ndola Airport Project ($59.5 million) and for the recently launched Indian EXIM Bank financed Lusaka de-congestion project from Standard Chartered Bank at $44.9 million. This is ‘Borrowing upon borrowing or borrowing to borrow’.
Mr. Simumba charged that this is very irresponsible because the country is now borrowing on borrowing and further inflating the costs of principal loan repayment and interest servicing payments.
He said this is the reason annual debt servicing continues to increase and now stands at US$504 million in 2017.
“Our domestic revenue is being consumed by public service salaries estimated at 60% and debt servicing estimated at0 30% leaving only ten percent for investments. This is why Government is struggling to pay local suppliers and contractors and has built up arrears of US$1.3 billion. When will the Government have the courage to come out clean and engage local and international stakeholders so we can revise the Economic Recovery Plan and ensure we get our country and economy back on the path of growth?”
Mr. Simumba claimed that high level sources have revealed that Government is busy looking for another US$60 million loan to finish building toll plazas.
“Should we borrowing for such? So where is the revenue from the current tolls going if they have to borrow more money to finish building these toll gates? We need to put a stop to this continued borrowing without restraint. As Herbert Hoover once said “Blessed are the young for they shall inherit the national debt”.
And Mr. Simumba says the Ministry of Finance should stop being defensive about Zambia’s growing debt.
“The truth will very soon come out because we have to start repaying much of this debt at some stage. Debt service payments for 2017 were US$504 million alone. Total public debt is now just above US$14 billion ($8.7 billion external plus ZMW 50.9 billion domestic). If you include domestic arrears total debt rises to just above $15 billion. This translates to 60% of GDP based on a GDP of US$25 billion as stated in the latest Economic Report,” Mr. Simumba said.
He added, “If independent analysts are wrong then give us the correct figures not preliminary figures please as is the case in the 2017 report. Citizens have every right to require transparent and verified Government data on our debts. That is why they are called public debts because it is the public that must repay these debts not individuals at the Ministry of Finance.”
Mr. Simumba wondered, “If Ministry of Finance itself four months into 2018 cannot produce comprehensive data on actual debt how then do they expect citizens to have this information? Why is the data preliminary four months into 2018? So if GRZ is issuing official debt data using preliminary figures where will we get the final debt figures that are verified and reconciled? It is clear Government needs to calm down and conduct a thorough review and audit of its public debts otherwise the questions will continue.”
“Second point the report states that 18 new loans were contracted in 2017 amounting to $1,750,849,448.15. What is scary and shocking is that out of this amount the Government borrowed from Israel alone $463 million for a “defence project”. Why is Zambian Government with the current problems the country is facing borrowing so much money for defence projects that have no economic return for the country. We should be borrowing to build economic and social infrastructure that would generate multiplier effects across the economy. Zambia is not at war to justify this level of borrowing for defence projects,” he said.
He further demanded that the Ministry of Finance to provide verified data on loan by Parastatals that are obtained using government guarantees.
“Could the Ministry also provide us with accurate figures for sovereign guarantees issued on behalf of SOE’s? Also how much is Zambia owing China for the 15% counterpart funding that is a key condition for release of funds from China EXIM Bank for supplier credits and for project finance. Could the Ministry also help citizens understand what the plan is for debt restructuring and renegotiation of terms?”
Mr. Simumba also observed that the Debt Management Strategy is very weak on this score and fails to provide specific strategies and actions that Government will take in this regard.
“As a citizen and an Economist I will continue to keep this Government accountable because I remember vividly the valiant sacrifice we made as Zambians to dismantle the $7 billion debt in the 90’s until 2005 when we reached HIPC Completion Point. We want straight answers not semantics,” he vowed.