WE need to revise our 2021 budget as it is the tool through which the country manages its public finances, says UPND leader Hakainde Hichilema.
In a statement to the media titled ‘way forward on debt and default’, Hichilema offered a myriad steps that the PF administration must pursue to rebuild credibility and creditworthiness.
Zambia has defaulted on its interest payment of US $42.5 million on one of the Eurobonds.
Hichilema is tipping the PF government to earn the trust of the global village and, above all, restore Zambians’ pride.
He implored PF leaders to ensure that they always read from the same script.
“We can no longer afford situation where the Vice-President assures creditors that there will be no default, and the country defaults within a few hours of issuing that statement,” Hichilema said.
“It reflects a lack of sincerity in handling this serious matter. Honesty is a virtue that should not be placed into doubt in any situation.”
Hichilema advised the government to pay the $42.5 million that has been defaulted on, in order to unlock the needed support from the bondholders, “as we embark on the more critical negotiations to re-structure our debt.”
He also suggested that the government must immediately engage the IMF and request for a staff programme, as a basis to embark on the journey to earn national credibility, creditworthiness, and a path to fully-fledged support.
Hichilema said that would give the needed assurance to Zambia’s creditors and potential investors of commitment to a coherent recovery programme, “as we focus on rebuilding our creditworthiness.”
“We have to come clean and be transparent about our country’s total debt exposure. The government must provide a full picture of our public external debt, domestic debt and private debt by quasi-government institutions that are not publicly guaranteed (including those contracted by companies now owned by ZCCM-IH and IDC), arrears to suppliers of goods and services to the government and VAT refund exposure,” Hichilema said. “The full disclosure must cover the terms on which the debt was contracted, for example, interest rates and maturity profiles. According to our Constitution, this information should already have been in the public domain for the consumption of the citizens, who ultimately are the debtors. But that is not the PF way; we the people need to know the terms and application of the loans that we will have to pay through the taxes that we diligently contribute to the treasury.”
He said the government ought to scale-up the engagement with all creditors, especially the bondholders, who feel that the level of engagement has so far fallen short.
Hichilema noted that such a process must be handled with seriousness, transparency and honest on the part of the PF government, to demonstrate the expected seriousness and commitment to finding acceptable solutions.
“We need to revise our 2021 budget as it is the tool through which the country manages its public finances. Our budget has significant gaps and our creditors have expressed similar misgivings,” Hichilema said. “The theme should be to cut all wasteful expenditures, such as slush funds, bogus expenditures on harmful and sub-standard goods and services, huge emoluments spent on politicians’ lifestyle, including the presidential jet. There will also be a need to re-prioritise expenditures, by allocating freed-up resources towards growth enhancing expenditure lines.”
Hichilema encouraged the PF to learn from the experience of Argentina and Ecuador, “which only a couple of months ago successfully restructured their debt, with the active engagement of the bondholders.”
He however, said sound leadership was an important requirement under such circumstances and called on the PF: “to own up and do what is right to address the crisis facing our beloved Zambia.”
“There is no time to waste,” Hichilema noted.
“The PF have delivered to the Zambian people a disaster that has tarnished the reputation of our country. We are the first African country to default in the COVID-19 era, following our failure to pay a $42.5 million coupon on the expiry of grace period on November 13, 2020. This reputation will unfortunately remain with us for decades to come.”
The opposition leader fears that Zambia now faces a real risk of holdout creditors taking legal action to seize the country’s sovereign assets.
“There are reports already that some creditors have embarked on a process to determine a possible payout to holders of default insurance, which may trigger a chain of collection of payouts that could lead to the recall of the loans in full,” said Hichilema. “Some banks are considering withdrawing confirmations of letters of credit issued to our business community, while others have suspended the global custody service and advised their clients to change future investment strategies for our country.”