ECONOMIST Noel Nkhoma says government should seek other means of domestic resource mobilisation and resist the temptation of over-taxing citizens in a bid to settle the country’s huge debt.
Following a sovereign debt default last month, Nkhoma observed that the limited avenues for resource mobilisation posed a temptation for government to over-tax citizens to service its external debt repayments, which included all three Eurobonds.
“Government is committed to settle the debt, but it’s an issue of resource constraints, basically. Yes, like the many people before me have alluded to, especially economists, any solution outside International Monetary Fund (IMF) is not feasible. So, we have to get back on an IMF programme, let it be an IMF-supported debt restructuring so that we can more or less be guaranteed that any programme agreed will be worked out. That gives comfort to the creditors, they’ll support the process so that their dues can also be realised. First of all, we pay sufficient taxes, I don’t think over-taxing Zambians is a solution to dealing with this issue. It’s not a solution and I think the people are over-burdened already with so many taxes,” Nkhoma said.
“It’s now called for urgency and that is why all debts have to be approved by Parliament. It seems they want to over-tax people, but how do you over-tax the same people that warned that over-borrowing was going to be costly to the country? The same people that warned that over-borrowing was unsustainable. Our leaders did not want to listen. And now the ones who were warning you should be over-taxed so that they pay for the debt? It doesn’t make sense. Let them look for other solutions that will help the country.”
And Nkhoma said no government should decide to deliberately default on sovereign debt at the expense of other creditors.
“There is no government that defaults on any debt deliberately no matter how small it is. This is an honest default and government’s compelling reason was basically as a result of the fact that other creditors were not comfortable with them settling debt with some creditors and leaving out the others. All the debt contracted were such that there was going to be pari passu treatment. Now, that treatment demands that there is equal treatment,” said Nkhoma.
“So, it had proceeded to deal with a certain type of creditors, which basically means that the others, who were owing more, would also have their debt due, which meant that government did not have capacity to pay all of them. That’s why they were asking for understanding. It’s a default arising out of sincerity. That is more reason why they have engaged Lazard (Freres) to be able to restructure and begin to have what we called ‘properly structured timelines’ in terms of payments and so on and have a situation where some can even have some creditors paid off completely.”