(By Chambwa Moonga and Masuzyo Chakwe)
AFRICA Confidential has reported that as Zambia’s debt swells, President Edgar Lungu has found a way to avoid being in the limelight by delegating Vice-President Inonge Wina to attend the Commonwealth heads of government meeting in London that ran from April 16-20.
But finance minister Margaret Mwanakatwe says Zambia is managing to pay its debts in line with its obligations.
The Africa Confidential says it is beyond doubt that Zambia is continuing to contract and plan new loans at “an unsustainable rate without assessment of value for money”.
According to Africa Confidential, Zambia’s debt was ballooning and for that reason, the Head of State opted to be absent at the just-ended meetings in London.
“The finance minister (Margaret Mwanakatwe) starts crisis talks with the IMF after the government fails to convince creditors, leaders of the 53 Commonwealth member states gathered in London for the 15-17 April summit, one African Head of State was conspicuously absent. Amid growing concern that Zambia’s debt has ballooned to unmanageable levels on his watch, President Edgar Lungu keeps out of the international spotlight (AC Vol. 59 No 7). His country is on the brink of crisis and the slide in the economy is damaging the copper-rich nation’s bargaining power,” the AC reported.
“Under fire from opponents – and, increasingly, from members of his own governing Patriotic Front – Lungu chose to avoid tough questions over both the debt debacle and his failure to begin dialogue on political reforms with opposition leaders, as previously agreed with the Commonwealth secretary general, Baroness Scotland (AC Vol. 58 No 22).”
The publication added that after a difficult few weeks in which more news broke about Zambia’s rising debt levels, Ministry of Finance officials met with investors in London on April 16 to allay anxieties.
“Finance Minister Margaret Mwanakatwe was absent; recent medical problems severely restrict how much travel she does. Instead she flew to Washington DC for the International Monetary Fund’s spring meetings. Mwanakatwe is trying to convince the Fund that the government has the situation under control, in an effort to rebuild trust and secure an IMF-funded programme. Her task is not easy. Confidence in the government’s competence and integrity has hit an all-time low, and opposition claims that Zambian external debt could be as much as twice the level reported by the government are now being taken seriously by investors and analysts,” AC stated.
“The last issue of Africa Confidential published further evidence that Zambia is teetering on the brink of debt distress, with the country’s real debt probably around 100 per cent of GDP (AC Vol. 59 No 7). Following the AC report and worries voiced by investors in other media, that other debts are yet to be reported, Zambia’s Eurobonds fell further to a par with Congo-Brazzaville. Congo-B is officially in debt distress after the discovery of undeclared loans last year sent its debt-to-GDP levels rocketing to 120 per cent (AC Vol. 58 No 19).”
The AC further reported that although Zambia’s economic situation was not yet so woeful, the market reaction reflected deep uncertainty over its debts and a severe loss of confidence in the government.
“The Nomura International investment fund was in negotiations last year with the Lusaka government to provide an urgent loan of $500 million to re-finance existing government debts; we now hear that these are not the Eurobonds. Nomura has been outspoken about the crisis, downgrading its assessment of the risk of investing in Zambia from ‘neutral’ to ‘cautious,’” it stated.
The AC further stated that the lack of clarity was damaging Zambia’s reputation and fuelling suspicions over notional “hidden loans”.
“Rather than the government actively concealing entire projects funded by already contracted loans, as happened in Mozambique, the confusion here is over the government’s methods for reporting debt…. It is also beyond doubt that Zambia is continuing to contract and plan new loans at an unsustainable rate without assessment of value for money. It can ill-afford the billions of dollars of external commercial loans that are already in the pipeline,” the AC stated.
It concluded that so cash-strapped was the Zambian government that it could not pay suppliers for vital goods like medicines and fertiliser, “yet it continues to press ahead with grandiose and overpriced projects on credit.”
“Executing the budget is difficult, some critics describing it as a mere ‘paper budget’. They report that, in practice, more than 60 per cent goes on officials’ pay and perks. With almost another 30 per cent needed for debt service, that leaves 10 per cent for everything else. The fiscal squeeze has led to problems with paying suppliers and VAT rebates. Domestic arrears – which the government says stood at 12.7 billion kwacha (US$1.3 bn.) at the end of 2017 – are fast piling up. This is now coupled with an aggressive drive by the government to increase tax revenues. The result is an increasingly antagonised business community and basic services in jeopardy,” stated the Africa Confidential.
“Aside from its rebuttals of some of the unfounded allegations that have emerged in the growing panic – that the government has defaulted on its Chinese debt, for instance – a statement issued by Mwanakatwe this month on the debt stock and ‘perception of hidden loans’ holds little water. If anything, it confirmed the scale of the problem and how anxious the government is to calm the markets, particularly as Zambia will soon need to refinance its $3 bn. Eurobonds.”
However, speaking to the diplomatic staff when she and national development planning minister Alexander Chiteme paid a courtesy call on Zambia’s Ambassador to the USA Dr Ngosa Simbyakula at the Embassy in Washington DC, Mwanakatwe assured Zambians and the international community that the country did not and “will never hide its debt”.
She told the diplomats that during their various engagements in their countries of accreditation, they should share and assure the international community that Zambia’s debt was still sustainable.
“It’s important for you to understand that we are not hiding any debt; give out the correct information. We are not intending, and we have never hidden any debt. You can’t hide a debt. Debt is like a pregnancy, it will show,” Mwanakatwe said according to a statement issued by national development planning spokesperson Chibaula Silwamba .
“We are servicing our debt and Zambia is managing to pay its debts in line with its obligations.”
She informed the diplomats about Zambia’s economic outlook saying the country had received a lot of interest in Foreign Direct Investment (FDI), particularly in the agriculture, tourism, manufacturing, solar and hydro power and construction sectors.
“You are our ambassadors at any given time; share information with your fellow diplomats here in Washington DC,” said Mwanakatwe.
And Chiteme urged Zambian diplomats to put the country first and engage with various stakeholders in promoting Zambia’s economic potential.
He urged the diplomats to always familiarise themselves with strategic policy documents that Zambia had in place like the Seventh National Development Plan, the Economic Stabilisation and Growth Programme and the Debt Sustainability Strategy and articulate them to the world as they market the country.
Chiteme said diplomatic missions were important linkages for Zambia with the international community and should position themselves to contribute to national development.
In welcoming the ministers and the delegation to the 2018 IMF/World Bank Spring Meetings, Ambassador Dr Simbyakula commended the government for spearheading the national development agenda.
Mwanakatwe and Chiteme were accompanied by Deputy Secretary to the Cabinet (Finance and Economic Development) Christopher Mvunga, Ministry of National Development Planning permanent secretary (Development Planning) Chola Chabala, Ministry of Financepermanent secretary (Economic Management and Finance) Mukuli Chikuba and other government officials.