Edgar Lungu says his government will borrow without shame, because it is borrowing for investment.
“If we run short of money, we shall responsibly borrow to improve the lives of the country. I must make it clear that there is no country that does not borrow. When we borrow, we borrow to use and not to eat. We are not ashamed to say that. They keep saying we have borrowed too much, yes we have borrowed because we have borrowed to invest, which is the right thing. We have borrowed and invested than any other government from the [Dr Kenneth] Kaunda era,” says Edgar.
No one is saying saying Edgar and government shouldn’t borrow money at all. What they are saying is that this government of Edgar has overborrowed. And one doesn’t need postgraduate economics to understand the dangers and consequences of excessive borrowing on an economy.
Edgar’s rantings and excessive defensiveness on this is laughable; it is infantile truancy.
Edgar is focusing only on one side of the issue – the investment of borrowed money in infrastructure. He is not at all trying to address the consequences of excessive debt or overborrowing on the overall economy of our country. Why? Is it a deliberate omission, an accident, dishonesty or this is simply out of ignorance?
Many Zambians also know that one of the main motivations for this excessive borrowing and infrastructure projects is corruption. Without these overpriced infrastructure projects, their corrupt pockets would also dry up. This is the main source of their sudden personal wealth – sudden wealth they cannot explain or account for.
Edgar doesn’t have the monopoly of wisdom on what the government should do. Borrowing cannot be endless. There’s a limit to how much you can borrow without busting your debt capacity. It’s very important to know the limits or extent to which a government should borrow. Exceeding that limit is harmful, dangerous.
To overborrow means to borrow more money than you can pay back or pay the interest on.
Yes, government can borrow for development projects but there are limits to how it can sensibly or rationally borrow. You can’t just keep borrowing simply because you want to quickly develop. If that was the correct way to quickly develop, there would be no country in the world without the infrastructure it needs.
The previous Zambian governments understood this very well and that is why they didn’t do what Edgar and his government are doing – overborrowing. It’s not that they didn’t want to develop this country very quickly; it’s not that they loved this country and its people less than Edgar loves it; it’s not that they had less wisdom or initiative than Edgar. It was simply because a country cannot be developed in such an irrational way, by such excessive borrowing without jeopardizing its future prospects.
And because of ignorance, arrogance and indeed greed, Edgar doesn’t care about overborrowing. What monopoly of wisdom on financial and economic issues does Edgar possess? The International Monetary Fund, the World Bank and many others with some reasonable knowledge about these matters have advised Edgar and government to avoid excessive or overborrowing. But it seems he is not ready to listen to anyone other than his inner demons.
Yes, the country needs infrastructure but at what cost? Even in our private or personal lives, we need all those good things, but we can’t acquire them by excessive borrowing.
It is therefore very important for parts of society to have the financial literacy to discern properly not only where to put their savings and investments but also where to borrow or even better, to plan and manage their finances in order to avoid being forced to borrow at onerous rates and terms.
Can we borrow our way out of debt?