By Nkonkomalimba Kafunda
It is clear from the latest figures on the country’s external public debt that it stands at, what is for an economy Zambia’s size, a colossal mind-boggling US$12.7 billion. What is not clear. however, is how this debt was accrued, what the money was used for, and most important who is owed what and under what conditions.
It must be stated from the outset that examinations by the government that the money was spent on infrastructure projects will never be satisfied without individual audits of all debt accumulated since 2011. Simply put there must be detailed breakdowns showing 1. When the money was borrowed 2. Who the money was borrowed from. 3 What the money was used for 4. How much is still outstanding and 5 The terms and conditions of the debt
It is also important to explore how we got here in the first place. When MMD left office in 2011, there was in excess of USS2 billion in reserves, how did that, in ten years of PF rule, turn into US$12.7 billion in debt. According to Bank of Zambia Governor Chris Mvunga reserves as at May 27 stand at around US$1.4 million or 3.5 months of import cover. Needless to say reserves have, in the recent past, been used to service debt.
At the end of the UNIP Era figures of around US$4 to 6 billion were being bandied about as the total debt left after 27 years in government, but the origins of that debt are not shrouded in mystery. Here a short history lesson will suffice.
In October 1973, four Arab armies invaded Israeli and almost wiped the Jewish state off the face of the Earth, in what is now known as. the Yom Kippur War. Yom Kippur is the holiest of holidays in the holy land and no Jew, including soldiers, is supposed to work. The Israelis were caught off guard and the Arabs were close to achieving their objective when the West particularly the United States intervened driving the Arabs back and saving the Jewish state from imminent extinction.
In retaliation, the Arabs used their most potent weapon, Oil. Through the Organization of Oil Producing and Exporting Countries (OPEC) under the stewardship of Saudi oil minister Sheikh Zafir, the vanquished Arabs increased the price of oil by 400% overnight. The intention was to punish western economies heavily reliant on Arab oil, but the action also affected third world countries also heavily dependent on oil. The oil crisis-hit countries like Zambia a severe economic blow.
At around the same time, the Vietnam War was coming to an end, and demand for bullets and by extension copper and copper prices fell drastically. So for Zambia, the price of its largest import increased fourfold while export earnings diminished in an almost similar fashion, leaving huge budget deficits for the immediate and medium-term future. In practical terms this meant all projects which were being financed mostly from the country’s own resources were now in disarray, the import bill for not only oil but an array of other requirements ranging from industrial equipment to essential drugs became unaffordable.
The Arabs, now flash with the new extra cash, filled with guilt and what could only be termed misplaced benevolence offered loans to Zambia and other countries facing similar predicaments to help them tackle their deficits, even though the borrowing countries had no capacity to pay back.
By the beginning of the 1980’s the debt had become so unmanageable that the west through the World Bank and the International Monetary Fund bought third world debt from the Arabs, not as an act of altruism but to keep Arab influence on the third world particularly Africa, in check.
To cut a long story short the UNIP regime failed to pay the debt and in 1986 broke off relations with both Benton Woods institutions causing severe hardship for Zambians which led to food riots in the cities and was a major, but not the only, catalyst to end Kaunda’s iron-fisted grip on the country.
When MMD came into office in 1991, they inherited this debt and a highly centralized economy. World Bank and IMF inspired Structural Adjustment Programs followed. Conditionalities for IMF/World Bank assistance included liberalization of an economy that had no capacity to compete with outside products forcing the closure of many industries and the retrenchments and redundancies that followed. The restructuring also involved the privatization of viable industries, shifting the means of production from the state to the private sector.
Efforts were made, significantly, through the Catholic-led Jubilee 2000 coalition to force debt fogginess or cancellation on the one hand, and on the other, the structural adjustments had led to the completion of the Highly Indebted Poor Country (HIPC) initiative allowing the country to be literary debt-free by 2005. That, in a nutshell, was the genesis and resolution of our first debt crisis. Note that it took upwards of 30 years to incur and resolve, not repay as most of the debt was forgiven.
As we now grapple with the second debt crisis the questions asked above will continue to linger. What was the money used for? Who is owed what and under what conditions?
As we ponder these questions let us put into consideration that irresponsible borrowing leading to unsustainable debt is against article 98 of the constitution which addresses issues of intergenerational inequity.