Finance Minister Margaret Mwanakatwe says government debt has been increasing because Chinese contractors are very efficient in service delivery, a situation she says attracts an increase in Per capita income (PCI) and puts pressure on state coffers.

And Mwanakatwe says government will work towards significantly reducing arrears to avoid stifling the private sector.

Reacting to interrogations from stakeholders following the 2019 budget presentation in Lusaka, Mwanakatwe said Chinese contractors are usually quick in implementing projects, adding that their effectiveness usually contributes to an increase in debt.

“And One of the reason why the debt has gone up, it’s because some contractors mainly Chinese, if you say do this in five years, they are super-efficient, they will do it in three years. Once it’s done in three years, the IPCs start coming. When the IPCs start coming, you need to pay up. They are quick, they are efficient and unfortunately sometimes, it works in a way that puts more pressure on our coffers. 80 per cent of loans, of debts contracted is being, to be spent in Zambia, when we sign a loan for $100 million road, that road is in Zambia. It’s not in China, it’s not in UK. It’s not anywhere. It is here, so that money contracted has been spent in Zambia,” she said at the Economics Association of Zambia (EAZ) budget analysis event.

And Mwanakatwe says government will work towards significantly reducing arrears to avoid stifling the private sector.

“Arrears dismantling; 2016, K19.6 billion arrears; 2017, K12.7 billion, that’s how much we dismantled. 2018, K13.9 billion. There is not a big difference between the two. We are hell bent on dismantling arrears. That’s why we have said domestic borrowing from 4 per cent to 1.4 per cent, that’s where we want it to be because we don’t like stifling the private sector. And we want to ensure that we as government are not the ones causing the MPL as existing right now. Ok down to 11.9 per cent, visa-vie 13 percent the previous year, but still above the ten per cent ratio. We need to make sure that we are not causing the MPLs. That’s why debt dismantling, very important for us and ensuring that we are not stifling the domestic economy and ensuring that we are not over borrowing in the economy. So, we will continue to dismantle the arrears that we have accumulated over the years. And this is why we are saying anything that own domestic borrowing, anything that is 80 per cent complete, we complete,” she said.

“There are many contracts where we borrow, that is external borrowing. So, when we say 80 per cent complete, we are talking about money that government is going to spend from the budget. So, what we shared with you today in terms of the allocations it is money that is made by us. We have direct access from customs, or exercise, or non-tax that’s our money. External borrowing, I shared with you the figure. I think it was 30.1 billion, that is money we are going to pay for interest payment and loan repayments.”

Meanwhile Mwanakatwe said government would introduce Financial Management Information System in the Ministry of Community Development and Social welfare to ensure that fund are accounted for.

“Now IFMIS is working. We have sorted out IFMIS now, it’s up and running. It took us a bit of time because we had to go back ten years and go and recreate data that we had lost. Now in testing public finance management, If you look at social cash transfer, there is no IFMIS there. There is no IFMIS, money comes into the country, it goes straight to community development. So, the forensic is what we are going to rely on to ensure that community development used IFMIS in the ministry not in my ministry because the money does not come to my ministry, it goes straight to community development,” said Mwanakatwe.

“We signed the agreement, whether it was a grant or a loan, we signed as government but the money doesn’t come to us it goes straight to the recipient. That’s not all grants, but this particular social cash transfer was going straight to the beneficiaries.”