FORMER commerce minister Bob Sichinga has warned that if government does not treat the debt crisis seriously, the economy will collapse.
On Friday, creditors refused to accept government’s proposal for a possible six-month suspension of interest payments on all debt.
Recently, finance minister Bwalya Ng’andu told creditors at a meeting that the country owed about US$18.5 billion in debt, including the Eurobonds.
However, other sources and the World Bank, say the actual figure is going towards US$37 billion.
The rejection by creditors effectively means that the country will default on repayment, which should have started on October 15 this year.
Reacting to creditors’ rejection of government’s proposal, Sichinga, who served in late president Michael Sata’s cabinet, warned that everyone would suffer the consequences.
‘’The economy is going to go further down; it will plunge into the abyss. It is already in a downward spiral. It’s just gonna get worse, not better. We’re all going to pay the price, all of us; every single citizen is gonna pay the price. It will create financial instability worse than even Covid,” he warned. “All in all, we have an absolutely critical situation in our hands. The financial situation, the economic situation is critical right now. This is not something to fool around with, it has serious implications. But, as usual, they’re [government] casual about it; they have not taken the situation with the seriousness it deserves. It is going to bite all of us. The whole country’s economic standing is going to be affected; we’ll not survive.”
When reminded that Vice-President Inonge Wina told Parliament on Friday morning that the country would not default, Sichinga responded: “To expect that they’ll service this debt is folly. How can the Vice-President say that? She’s not even a financial person. How does she know that they’re going to be able to service it? And if she was right, how come we’ve ended up with this situation where the creditors have refused?”
Sichinga, who is now Our Civic Duty Organisation spokesperson, further explained the implications of debt default, warning government that, “they are playing with this debt”.
“Let me tell you what these lenders can do; one, all these Visa cards will be useless. All the Visa cards that people are using in this country, the whole financial system will be brought to a halt,” Sichinga said. “Next, if they get judgment, let me give an example, Zamtel. If the Libyans get judgment, you know what they do? They follow all those; it goes to what they call vultures, Vulture Fund; those guys are rough. They’ll confiscate any asset that belongs to Zambia; cash, vehicles, aircraft, whatever.”
Sichinga said currently the country has been brought to a situation where it can no longer borrow.
“And then what have we become? A financial basket case, because then you cannot borrow, even from China. That’s why China is refusing to relieve you of debt. And what will China do? They’ll come and say, ‘ok, we’re taking collateral’. Collateral is where? The assets of the country. What will you do?” he asked. “The President has not even put together a team and treated this as an urgent matter. He should stop everything else and focus on this matter because it has got dire consequences for the whole country. So, what I’m saying to you is that they’re not treating this matter with the seriousness it deserves.”
Sichinga pleaded with the government to teat the situation as a crisis and respond quickly.
He further advised government to show honesty by revealing how much they owe China and other creditors.
“They have not realised the seriousness of default. The country will go into what is called hyperinflation; nothing is stable in terms of price; it changes by the hour. Finding foreign currency is going to be a big issue. With all due respect, we are going to go the Zimbabwean way, that’s where we are going to be,” Sichinga said. “The debt is heavy, and it’s not even the numbers we’re talking about; it is towards US$37 billion. This is a serious situation, unless something drastic is taken to come to a level where we must have agreement with the creditors, however difficult it might be. So, it requires skills of people that know how to deal with this; we have been here before.”
Sichinga reminded President Edgar Lungu and team about the arrogance they showed when people questioned their reckless borrowing.
He advised them to engage all creditors again and show seriousness about the matter.
“They have got to put together teams that are serious and they’re knowledgeable. This thing of behaving the way they are and burying their heads in the sand is not gonna help them,” he said. “They’ve got to sit down with all the creditors; having done a proper analysis, being truthful to themselves. They must sit down together and say this is where we’re standing, and work out a strategy. I cannot give them advise because I don’t know where they’re standing; they’re not truthful. I don’t know what debt they contracted with the Chinese. So, they have to deal with this issue themselves.”
And Sichinga questioned the way government has treated the mines which are a source of revenue.
“Now, which are the major sources of our foreign currency? It is the mines. How are they handling KCM? How much is coming from KCM? Where’s the money for KCM going? Have we got statements from the so-called liquidator?” asked Sichinga. “That has to be answered. Next, how are they handling Mopani? What is being done to deal with that because it’s a major source of revenue? Where are we at? Has the country been briefed about the economic situation?”