Zambia is in a Debt Crunch.
I note with concern the lack of a clear strategy by the government on how they intend to repay the Eurobond. The only thing the government announced last December was a creation of a sinking fund. Until now we do not know how much has been raised and what has been paid back towards the bond.
Today, the interest rates are at their highest in more than a decade and our inflation has gone haywire. In short our government is broke and nobody is talking about the Eurobond as a major concern. The government is living beyond its means and those close to power are too comfortable to notice that our economy is collapsing.
Just to provide some background regarding this situation. Of all the governments that have been in power, we have accumulated more debt in the last 5 years than ever before. This is also owing to the fact that the country’s economy is under intense pressure from global factors. At the point of leaving office, Dr. Kaunda left a debt of USD 7.1 billion which was inherited by the MMD. President Chiluba left USD 5.6 billion, late president Mwanawasa left 2.6 billion, president Banda left only USD 0.5 billion, late president Sata left USD 7 billion for the 3 years he was in power and finally the current debt stands at USD 9 billion under president Lungu. So far the PF has not demonstrated any willingness to pay off the debt as it was with the MMD when for former ruling party formed government.
In the recent past the PF government issued Eurobonds of USD 750 million at 5.38 percent interest per annum, followed by USD 1 billion at 8.5 percent interest per annum and USD 1.2 billion at 9.74 percent interest per annum. This means that our minister of finance needs to find USD 247 million per annum or USD20.6 per month to service the debt with just these 3 loans. The current debt the country has means that every Zambian citizen including children has a debt of approximately USD 800 that we need to pay.
Our inflation rate on food today stands at nearly 26 percent and it is expected to worsen by further 7 percent by the time we get to the last quarter of 2016. The salaries for civil servants and those in private companies have not been increased to match with the increase in inflation rates. This means that most people’s salaries have been reduced by about 26 percent in real terms. Taxes on the other hand have not been reduced to cushion the impact of current economic recession.
The amount of money our government has borrowed has put our treasury under serious financial stress. Our government is currently borrowing without caring about how the debt will be paid back. What is even more painful is that most of these loan proceeds went to road construction projects with contracts awarded to foreign companies (mostly Chinese). This means that the majority of this debt has left our country in payments to road contractors. I may not be wrong to conclude that Zambia is borrowing to develop China and again we go back to China and ask for assistance. Our country will for a long time continue servicing the debt that has actually gone to further develop China.
Our national services is well positioned to do these roads and ensure that the funds for road construction remain in our country to deal with the increasing poverty levels currently standing at 76 percent. Our universities produce engineers but we do not make use of the skills acquired.
One would have thought that when we are at the brink, we would see the bigger picture, be humbled by the reality and live up to our responsibilities. This reality should be reason enough to promote unity among political players to bring about solutions in the interest of Zambia. In the meantime however, both the opposition and ruling PF have not shown leadership in trying to come up with solutions, but instead they divert our attention by blowing petty issues out of proportion.
It is upon the president to ensure that confidence returns among the Zambian people and to the Zambian economy. President Lungu MUST provide a clear road map to put Zambia on the path to sustainable and equitable growth. At a point like this, the opposition should stand ready to support measures that will steady the economy and avoid unnecessary criticism. As citizens we must also be ready to support a growth strategy that takes Zambia where it belongs. We should demand a plan that creates a convergence; with productivity, job creation, fairness and inclusivity at the centre of our growth agenda. President Lungu should provide Zambians with a credible course for a stronger and better future.
The PF must show Zambians that they care. The government must think of the families thrown into uncertainty because their bread winners, serving our country in civil service cannot be paid on time. Think of the thousands of suppliers of goods and services to your government whose businesses are collapsing because they have not been paid.
The PF must tell the Zambian people where there are taking us and how they intend to get us out of poverty. They should not wreck the nation, otherwise the ending will be a bad one. The PF must take responsibility and should not underestimate the urgency of the situation Zambia faces. Do not underestimate your imperative to act. Please get up, report on duty and sort out the mess.