The World Bank says it is most likely that most of the Eurobond has been used to finance Government’s consumption.
And the World Bank has observed that the third Eurobond of US$1 billion did not have a detailed plan of how it would be spent unlike the first two.
In a report titled How to Borrow without Sorrow, the World Bank noted that where resources from the Eurobond had not been linked to specific investment, it is most likely that they have been used to finance Government’s consumption.
The report released last December shows that the first two Eurobonds were accompanied by a detailed plan of how they would be spent.
The third Eurobond however had no such plan, but that statements were later issued that the funds would be used for infrastructure.
It says most of the resources were earmarked for the transport sector and mainly the road sector.
The World Bank noted that most of the recent trunk road investments since 2011 have been delivered as part of the Link Zambia 8000 (US$5.4 billion for 8,000km of roads, 2012-17) and the Pave Zambia 200 project.
It says other urban road programs, include Lusaka 400 (US$350 million to rehabilitate and upgrade 400km) and the Copperbelt 400 (US$492 million for 406km).
“To fund these ambitious programs, the government utilized lending from China, other traditional and non-traditional development partners, and US$ 28 million earmarked from the Eurobond proceeds,” it states.
“There is not much argument about whether investment in infrastructure is necessary (Zambia’s infrastructure lags that of southern African peers and is important for growth31), but there has been concern about whether the right projects have been selected and whether value for money has been achieved,” the report says.
It observes that the road programs were very ambitious (9,000km of roads in five year) and that they were not well prioritized.
It further notes that a framework was absent to direct resources if less than US$6 billion were made available.
“When the available resources fell short of this figure, the selection of roads became haphazard and was not always motivated by economic and social returns. The cost of the roads has also been high relative to the cost of construction elsewhere in the region,” it read.
“For Zambian roads, the median cost of construction and upgrading of paved roads under 100km was US$457,000 per km per lane, and for roads over 100km the median cost was US$360,000. When compared to the median cost of paving roads in the region, Zambia’s roads stand out as being very expensive (box 8). It is often argued that Zambian roads are more expensive than other countries’ in the region because of the higher cost of inputs such as steel, cement and bitumen.”
The report however states that the difference in the cost of bitumen and cement explains only some of the high cost of Zambia’s roads.
“The reason for the high costs relates more to poor public investment management (especially a lack of competitive tendering) and long delays in payments. The much higher costs of road building increase the avenues for corruption,” it says.