Economy

Opinion: First Step To Solving Zambia’s Quagmire Of Financial Indebtedness

Blessings Kafwanka
(Business & Financial Analyst)

Acceptance is the starting point to finding a solution to any problem you may encounter in life. If you refuse to accept that a problem exists, it becomes virtually impossible to find a solution. The next step is generating or identifying possible solutions. More often than not, there’s always someone who has gone through the challenges you are going through right now. They say “a problem shared is a problem half solved” You don’t have to reinvent the wheel. Learning from the experiences of others will save you the trouble of spending time, energy and resources before you can figure out how to get out of that predicament. After that, you need to take decisive action to address that problem and bear the pain (side effects) that might arise.

That said, it takes a lot of courage for political leaders to accept the consequences of their actions. In the last 6 years, Zambia’s debt has ‘ballooned’ by well over 1,000% from about US$500 million in 2011 to US$12.5 billion in 2017 representing 47% of GDP. The worst in the history of our Zambia. Additionally, there’s no clear strategy of how this debt will be dismantled, especially the Eurobonds that will fall due starting from 2022 onwards. It’s great that Hon. Felix Mutati has finally accepted that Zambia’s debt risk has moved from moderate to high. But does this government have the tenacity to take decisive action to correct this position? There are a lot of lessons that can be taken from our history.

Not so long ago, late president Levy Patrick Mwanawasa’s government was faced with a quagmire of financial indebtedness similar to the one we are experiencing now. The intensity of the problem may differ, but surely, we can learn something from the way he engaged the International Monetary Fund (IMF) and endured side effects of the conditions given such as wage freeze, employment freeze, zero tolerance to corruption, prosecuting erring officers in public institutions, both past & incumbent office bearers regardless of political affiliation. Late president Patrick Mwanawasa was uncompromising in his fight against corruption to an extent of allowing the prosecution of the man that played a major role in his ascendance to political power.

During his tenure, we witnessed several corrupt leaders that were prosecuted and convicted without fear or favor. Today, our leaders have chosen to embrace and work with the very leaders they accused of being corrupt and mismanaging the country’s resources when they were in the opposition.
The international Monetary Fund (IMF) only makes loans if deflationary policies are followed. From the inception of the current talks between the IMF and the Zambian government, a number of deflationary policies were proposed by the IMF which include:

• Ban on unnecessary travel. This should be restricted to essential travel only
• Reduction in government expenditure
• Plans to start a new national airline should be will be differed
• New infrastructure projects should be halted. The old projects may continue
• Review the subsidies on agriculture and electricity tariffs – gradually shift to higher and cost reflective tariffs

If receiving the US$1.3 billion concessionary loan from the IMF depends on government’s adherence to the above pre-conditions, what are the chances that the loan will be granted? How have we fared in terms of restricting unnecessary travel, reduction in government expenditure and halting new infrastructure projects? How have we fared in terms of promoting fiscal discipline in public institutions and genuinely fighting corruption? Today, the prospect of clinching a deal with the IMF looks bleak due to the high and unsustainable debt position were are in.

Hon. Felix Mutati is right to accept that Zambia’s debt risk is high. But, in as much as acceptance could be the starting point to getting out of this quandary, decisive action must be taken.

This might involve political leaders making tough decisions that might not resonate well with the electorate in the short term. But in the long-term, the benefits will certainly be overwhelming. ‘Long-term perspective’ is what differentiates good leaders from bad ones.

“Politicians think of the next election, leaders think of the next generation”.

14 Comments

  1. Dumdum

    NOT going to happen with Lungu in charge! The first three say it all!

    • Ban on unnecessary travel. This should be restricted to essential travel only? Can Lungu stop visiting Swaziland to see naked girls and commissioning “farm harvests” ???? Never!
    • Reduction in government expenditure? And how are all those corrupt contracts going to put money in Lungus bank then ?? Not going to happen.
    • Plans to start a new national airline should be will be defferred ? And no free travel for pf cardres and their relatives ? You have got to be KIDDING! That is why the airline is needed !!!!!

    • Daywalker

      These junk economic theories that want to argue about international pocket change. Let’s do it big. Borrow big.build big but for our people not international poverty profiteers. $20bn is money of one rich guy for instance not something a naturally rich country should be squirming about. Grow up.

  2. Sj

    Is it not about time some citizen/politician (serving in Govt) took centre-stage to tell the nation the truth and spell out what to expect with the ailing economy, instead of stucking things under the carpet?
    Be honest and say decisions such as this/these ‘ve led us up to the misery experienced. Or no one has enough gut, it will be business/pretence as usual. Happy go Lucky? What they don’t know won’t hurt them. Well we feel the crunch. Comment

  3. Sj

    Is it not about time some citizen/politician (serving in Govt) took centre-stage to tell the nation the truth and spell out what to expect with the ailing economy, instead of stucking things under the carpet?
    Be honest and say right/wrong decisions such as this/these ‘ve led us up to the misery experienced. Or no one has enough gut, it will be business/pretence as usual. Happy go Lucky? What they don’t know won’t hurt them. Well we feel the crunch. Comment

  4. Emmanuel chipili

    Capital projects will always attract huge debts, but statecraft without infrastructure development is inadequate,that’s the history of the past 50 years of lagging behind other nations.Yes debt servicing is essential,prudent fiscal policies necessary but must not derail the major task of changing the face of Zambia.We welcome international advice but we sovereign enough to determine our destiny.Econometric without wisdom may make everything academic exercises .let’s move together we are on course

  5. kachana

    As zambians we made a costly mistake of having voted for late Michael Sata. He is the one who has taken this country back to HIPC days. You cannot start very expensive projects all at once in all provinces and at the same time changing provincial capitals and creating new districts. sorry to say this, it was wrong to vote for a semiliterate person as head of state. We must not pretend, sata has put us in this mess!

  6. mulongoti

    I think they borrowed for good reasons e.g. infrastructure development like roads will attract investors and things will start falling like manner so Mr writer don’t worry they’re big by 2022 they know what they’ll do

  7. mulongoti

    If a family is developing a structure e.g. the house they as families they for go a lot of things e.g. leisure .eating well and concentrate on one thing so as country together let’s bear the cost joy comes in the morning it’s a good thing there doing can’t you see the mongu-kalabo road sure muletasha b thankfull we nid development mwebantu

  8. NF

    They borrowed big to secure re-elections (sontalism) and make commissions on tenders. It was all out of personal interest not national development.

    Just prepare for either more indebtedness to China to pay off old loans in exchange for minerals, land grabs, sovereignty or debt default that has already happened in Mozambique or economic meltdown like Venezuela if the balance of payment situation worsens.

    Mr Kafwanka you voted tribe instead of reason so enjoy your cake plus please don’t mention Levy Patrick Mwanawasa who you hated so much when he was alive just because he was Lenje.

    @kachana

    He also bankrupted Lusaka City Council with Merzaf. Most PF cadres don’t know this but still wouldn’t understand even if you explained as seen by the comments. Ignorance is very expensive.

  9. Mwape

    It’s definite that we have politicians and not leaders in our midst. No need to flog a dead horse as it’s clearly spelt out what needs to be done. There is just no political will. Period!

  10. kaya

    The problem with this country is that charlatans pass for opinion makers!

  11. No Nzelu

    A business and financial analyst who doesn’t even know what he is talking ahout just like a president who failed to run a law firm.

    No wonder this country is a mess.

  12. f

    Its a pity our leaders aim at political mealage and of fattening their pockets. What should zambians do to make paradigm shift. We surely need leaders that will stump out corruption and focus on laid agenda and not otherwise.

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