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Don’t cry over ‘failed’ IMF deal, it was also debt – LubindaBy Mirriam Chabala on 7 Dec 2017
Zambian Economist Dr Lubinda Habaazoka says failing to clinch an IMF bailout package is not something to cry about because it is also debt.
In an interview, Dr Habaazoka said the only solution to Zambia’s debt problems was to reduce government expenditure.
“The failure to acquire a bailout from IMF is not something to cry about because that also is a debt in itself but the only advantage of an IMF package is that it forces government to be prudent in the way it spends its resources but the package comes with a lot of conditions which might end up pushing the population into poverty through cost cutting measures which are going to be very brutal to the population and yet it is not even general citizens that use these resources,” Dr Habaazoka said.
He however noted that the country would suffer liquidity problems without an IMF package.
“So if we get an IMF package, we are going to experience high austerity measures on the party of government and if we don’t we are going to have liquidity problems going in the future. But government announced that they are going to borrow money so they think that they have found a solution to that but unfortunately the only solution to Zambia’s problems is a reduction of government expenditure and reduction in the prices at which we procure public tenders. Our tender systems need to be improved,” Dr Haabazoka said.
He said that it was unfortunate that government was planning to borrow more money.
“It’s quite sad that government has announced despite being told that we have the highest debt in our region, to again borrow more debt to pay the euro bond and that they want to borrow more debt in 2019 to pay debts on the euro bond. I don’t know how they are going to refinance them because you cannot pay a bond before it matures in this particular case, you can only repay it when it matures but you can’t recall it. So if we get debt in 2019, then we need to pay it in 2021 and by then we would have finished all that money so the only time we can refinance is in years in which they fall due, so that decision by government to borrow money in order to repay the euro bond is just another way of actually acquiring even more debt,” Dr Haabazoka said.
“So my advice to government and other related institutions is that we need to live through the pain and see how we can reduce government expenditure and amounts said to be going into debt servicing not over milking the public and also not borrowing more debt because that is just pushing the country into huge debts in the future which is very sad.”
He observed that public debt had increased tremendously during the PF’s stay in office.
“I think it’s very unfortunate that we actually had to wait for the international community to tell us that our debt was very huge. When you look at the genesis of our debt, it all started with the issuing of euro bonds that everybody was told was oversubscribed and everybody was very happy with the first issue where we were told that we only needed $500 million but we were oversubscribed by $9 billion and despite our worrying and fears at that particular time that it was going to run us into a ditch, the government went ahead and issued three euro bonds totaling close to $3 billion. Government also acquired a lot of sovereign loans on the international debt market and also got bilateral loans from cooperating partners and of course our debt has grown from 2011,” said Dr Haabazoka.
“In 2011, our debt stood at $1.2 billion and now we are talking about over $10 billion foreign debt with other estimates putting it at $17 billion dollars because of other guarantees and debts that have been acquired by government, so I think the figure that might be given might even be far much higher than what we think we owe because of misrecordings and miscalculations.”
About Mirriam Chabala
Mirriam Chabala is a Zambian journalist who covers current affairs and writes in-depth feature articles on social issues.
Email: mirriam [at] diggers [dot] news
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