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.
There were some who put Zambia’s foreign debt at $27BN and one of them was this scruffy chap Nkonkomalimba. How come he’s now put it at $12.7BN? He’s just a styopet idyoti
@Ayattola please don’t hide under a pen name.
It shows one is fake or a coward. Mr Kafunda has given us facts and a chronology of how KK got zambia into debt. But counter his story with facts. How did PF get us in this debt pit chapwa.
Does Zambia have capacity to repay the loan? The answer is YES!
The second term of ECL will show his will and zeal to do just that! There will be reduced infrastructure expenditure and increased revenue generating projects through the IDC. Thereby enhancing capacity to liquidate the said loans.
VIVA ECL!
2021 Hazaluza Hagain (HH) KALUSA LUSA
PF raised the debt ,shifted the GDP gear down and defaulted on Eurobond debt.That’s the equivalent of PF killing 3 big birds with one bullet.
KAIZER will not comment because he lacks the basic intelligence to understand debt accumulation, ena ma cadre issues fye
Whether 12.7 or 27.3 billion, it’s a ridiculous amount, and it has gone in PF pockets. Lungu’s son has bought NINE farms in the Kanakantapa area, and he is seen in his car every day, racing through the village, shouting at the Chinese workers to make sure the road has been fixed before August 12! All bought from YOUR money!
Very soon KZ the UK based troll will go silent. He sees the writing is on the wall. The enormous crowds coming to see the opposition being teargassed by the police, sent by his treacherous boss, but not giving in. August 13 the police will ARREST the former president and lock him up in the same cell that HH was put in two years ago. KZ can go next door!
Opened the article looking for constructive analysis, read the 1st paragraph-“….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 STOPPED!! Didn’t read the rest of the cr@p. Only a upnd donkey can write such useless rubbish to make the PF GRZ look bad and the diasporan upnd donkeys will come out in full support as an intelligent article. Just like Field Ruwe who seemed like an intelligent critic only to expose his latent support for upnd and lost the respect of rational readers-Nkonkomalimba is just another upnd cadre masquerading as an intelligent analyst. Repulsive…
@ Ibrahim Bakayoko I witnessed all that Nkonkomalimba has said and none of them caused the UNIP debt. Kaunda borrowed to fund liberation wars in the region not Yom Kippur. This chap masquerades like an expert and analyst at some media but I do a better article with real facts and not hearsay. The other was when KK abruptly decided to pay cash for nationalized companies under Mulungushi reforms, that’s what caused a deep in the budget
Zambian citizen, I thought the same. I opened this article and saw how badly the sentences are constructed with wrong punctuation. I then realised it was not worth reading this rubblsh from a tribal upnd donkey. I can’t waste my precious time on such clowns. I have better things to do.
No corruption it seems your head is polluted and corrupted with tribal upnd faeces. Your thinking has been clouded by your tribe and loyalty to a very dangerous tribal grouping called upnd. No one on lusaka times takes d.i.c.k heads like you seriously apart from fellow d.i.c.k.s like tarino
I can’t even understand why it’s called “unsustainable” debt. So if Zambia started to experience an economic upsurge and began to pay off this debt gradually (as we all anticipate), would it then suddenly become “sustainable” debt?
The key with high debt is always the growth rate. If high economic growth is achieved, then the debt problem will actually take care of itself. Austerity policies like those imposed by the IMF only help to a very limited extent with high debts like ours. Saving (or stopping to borrow) is also of little use. Examples the world over show that the best way is for a country to grow out of it’s debts.
Zambia owes upwards of $17 billion.
To manage to payback this debt and sustain development, Zambians need a Chinese work ethic, because Zambia is simply not rich enough as in minerals…….
Even if a messiah leader was to appear, 2 terms in office is not enough to save Zambia from this debt…..
Zambia is truly done for atleast 50 years…..
READING SOME OF THE NONSENSE ON HERE WHO HAVE LITTLE KNOWLEDGE OF COUNTRY FINANCES AND DEBT IS DISTURBING
ZAMBIA’S DEBT IS AROUND $ 20 Bil ++ THIS DOES NOT INCLUDE THE UNACCOUNTABLE CHI *NESE UNDISCLOSED COMMITMENTS
WAKE UP PEOPLE AND TAKE YOUR BLINKERS OFF
AND REMEMBER THE TRUTH WILL BE REVEALED WHEN THE NEW GOVERNMENT TAKES OVER IN AUGUST
The GDP of Zambia is highly suppressed and needs to be revised. Zambia is able to pay back the debt she owes her debtors, surely the second term of ECL will show a strong rebound in the economic activities, the foreign exchange revenues will improve drastically so are the local revenue collections. What the so called economic fixers are not telling their potential voters is to say the stage is set for economic take off. In the usuall cunning manner some opposition leaders simply tell their supporters that they will correct the ills of the economy.
ECL is investing wisely and therefore Zambia will be able to pay back the debt.
{1}. We can pay this debt. All that it needs is to move away from a Job-Seeking-Mindset and tap into our creative minds. Growth will come from the Private Sectors. Its not so Scientific to grasp or understand. That does not give a free pass to PF from maintaining the house in order.
We are a people that are extraordinarily blessed with so many natural resource and massive land. For a long time, our education systems and culture has taught us to finish school, college or university, and go and look for a job. Then stay in that job until you retire or drop dead. That mindset has killed developing nations. The biggest source of wealth is the Human Mind. That’s where all things come from. Yet, we complain and cry all the time, failing to step up and become +Visionaries, +Creators,…
{3}. Like I mentioned before, I am not a fan of Fred Mmembe, but I “respect” him for his Drive and Determination.
From being an Accounts Clerk at Zambia State Insurance to starting the Post Weekly Bulletin, which became a 7-day print media, beating the Times of Zambia and Zambia Daily Mail in sales. He formed The Post Couriers Services and finally Zambian Airways until when greed got to his head. Mmembe created about 900 jobs including street newspapers sellers. Can you imagine if, in every 5000 Zambians, there was a person like Mmembe creating jobs that pay taxes into the government? Which in the end will clear National Debt.
Chendabusiku your ECL already served his second unless you can’t read. Your ECL is committing a crime by going for a third term. There is a court case right now and zambians are tired of his underperformance anyway.
{6}. Last and not least, Indian Asians came to Zambia just as mere expatriates working as *Teachers, *Doctors, *Accountants, *Dentists, etc. The same people spotted opportunities and built Retail Empires, Filling Stations, Banks, Construction Companies, Private Medical Centres. And now they are into manufacturing and doing great, bringing in Forex. Why not indigenous Black Zambians?
This is now turning out to be generation curse and the cycle will continue.
Before we are misled, we should understand this data in relation to other Countries.
External debt 2020 in USD
Zambia 12.7bn
Zimbabwe 14bn
Angola 52bn
Nigeria 54bn
South Africa 188 bn
Further,
We need to check back at prosperous nations debt to gdp ratios at the time they emerging from major down turns resulting from wars.
Check Japan after WW1
German after WW2
We also need to understand that Zambia’s debt is not high as such. What makes this debt to look so big is our own luck of ambition. Zambia would be in perpertual poverty if we don’t bite the bullet now. We had to upgrade infrastructure to attract investments to utilise the resources that remain locked due to lack of roads and bridges. To sustain the anticipated growth, we need schools, hospitals and even security.
We are not going to Bury our heads in the sand that economic turn around would happen by magic.
Zambia has a lot of resourses to repay the debt even when the debt cuts a US$1trillion red line.
You must think like a nation, most of you chaps are heavily indebted at household level. I bet even the author of this article is in or has tasted debt.
Don’t act like you’re damn blind. I know you’re not. Under MMD, the nation was rich on paper and crap on infrastructure.
Contruction is very expensive today than never before.
If only the country- Zambia itself could with magnitude and scare harness into the abandant Natural Resources and attached to it proper management you could care less about the mere US$12.7 or US$27. I hate chaps with limited thinking. Zambia is not a person.
Zambia can now boast of having two mines which can easily pay off whatever the ka debt is…KCM can give this country close to 12billion dollars, Mopeni 10 billion dollars, gold mine 6 billion dollars, Marijuana export 30 billion dollars..In life they are people who are just negative..let them be leave them personally i don’t waste my time and energy.. Viva Pf
The country will soon become the net exporter of electricity as well as provide uninterrupted power to mines to due to anticiaored incresse in production and price. As a country we’re becoming increasingly food secure and excess maize and mealie meal is set for export and this is guaranteed with the local food security guaranteed by the involvement of security wings except the police in agriculture. We should not forget ZRA has been collecting taxes above target and the reserves have started going up in the midst of covid. The prospects for the country are bright thanks for bold decision the govt have taken in building infrastructure and reforms in revenue collection systems.
The question is where was all this $12.7b used?
Arm chair critics. They rely on the internet and believe in anything they find. Kaunda Kenneth and others are alive. Seasoned researchers do analyses to sieve out trash. Interview KK. Groups like OAU, SADCC ‘ate’ our money. KK believed that for as long as Africa is not liberated, Zambia won’t find peace.
As for where the PF government debt went, it is documented for all to see.
Taking a long time view and see the real options those PUBLIC DEBT financed critical infrastructure developments will help to see what sought of economic policies and industrial transformations will help to model the Zambian economy and position it better based on the solid infrastructure developed in those special zones and economic locations We need a sector manufacturing review now to implement policies say in the Motor and Engineering sectors like Ghana has done with its debts to perform their economy and emerge even better The PF prospects are better and given the 2021 to 2026 focus on economic recovery, Zambia can be a better place See and Take a long-term view and…
The 7-year bond, with a coupon rate of 1.25% per annum payable semi-annually and a maturity date of 9 June 2028, was priced at 99.414% to yield 8.8 basis points over the 1.25% US Treasury notes due May 2028.