Uncontrolled appetite for road construction has contributed to debt distress – Saasa

Economist Professor Oliver Saasa says there is nothing that government is doing to address the swelling external debt that now stands at US$10.05 billion.

And Professor Saasa says government’s failure to get the IMF bailout deal has contributed to the country’s current debt distress.

In an interview, Wednesday, Professor Saasa said money meant for social sectors such as Education and Health was being used to service the debt, hence the delay in the payment of salaries for civil servants.

“If there is a recognition that there is a problem, we need to do something about it. I don’t believe we are doing something about it and that’s really explaining where we are now and unless we reduce our appetite for construction of roads we are going to have a big problem. What we are seeing now is that we haven’t defaulted on debt payment but what’s happening now is that we are using social sector spending. You recall the minster came midyear last year, re-arranging and picking from the Social sector, Health, Education and the like, to put into debt servicing. So you may not have defaulted at external debt obligation but you have defaulted on paying social service delivery. You can’t be surprised now when you see government unable to pay salaries, especially in the social sector of education, paying for drugs when you go to hospital. That’s what we have been advising government that it will translate into social welfare provision which will be affected and that’s where we are,” Professor Saasa said.

“I think at the end of the day one has to accept that the level of debt presently is a product of policy lapses at the level of not only the current minster but over a period of time. One would also accept that Honourable Mutati (Felix) tried to make his mark on addressing these challenges but he didn’t get significant support from his colleagues in cabinet, so it would appear. So Honourable Mwanakatwe come in and finds a problem that initially if you recall she was in a state of denial, was not very open about the existence of the problem. When she was advised about it, she sort of like she would rather look warm in addressing what everybody outside government, those who have professional training to understand what’s happening, was worried about the fact that we were heading towards the debt distress.”

Professor Sasa said government was hiding its Debt Sustainability Analysis from members of the public to avoid embarrassment.

“For the first time they come out and acknowledged that there is a stress and we have to address it. But you realise that that was after the Debt Sustainability Analysis was released and then they decided to hide it. Which might suggest to many and including myself that perhaps the results of DSA were severely shocking and revealed very serious issues that everybody was concerned about. But having been denying for a long time, they thought it was going to be embarrassing to openly admit that the opposition and professional bodies were actually correct,” he said.

He said the debt stress was mainly caused due to the accumulation of foreign debt for road construction.

“I think now we have reached a stage where there is acceptance, which is good because if you want to cure a disease you must first diagnose it correctly. So the minister accepted that there was a challenge and that’s how she came up with the blueprint where they talked about suspending of some projects mainly in the Road sector that were less than 80% completed, and other things including restructuring of the debt and the like. We are still waiting for figures but up to now I haven’t seen figures that translate that policy into action,” Professor Saasa said.

“Now government has recognised that there is a problem, they must also recognise that much of the accumulation can be associated with the appetite for contracting debt through construction, mainly the road infrastructure. And much of this debt in the last three years has been mainly sourced from China but again it was the Chinese that the President was addressing within a week that the minister released the statement that don’t worry you are not going to be affected by this, and yet for the last three years it has mainly been the Chinese debt. So there was some element of contradiction in that.”

Meanwhile, Professor Saasa said the failed IMF deal had contributed to the debt stress.

“And for me, that’s how we got where we are. Had the government listened to professional advice and their own Debt Sustainability Analysis, probably things could not have been the same. But most importantly because we don’t have a program with the IMF. One of their concerns is whether we have any Debt Sustainability Program that would show that we are serious about it. And we are not yet ready to have the IMF come in because they are reluctant. When you have a program with the IMF it’s not just about the money, you can get that $1.3billion even from the Chinese, but the IMF program is more than just money. It looks at structural reforms, the expenditure pattern and the programs you have to reduce poverty, that’s when they can commit to a deal with you,” Professor Saasa said.

         

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jordanchulu@yahoo.com
jordanchulu@yahoo.com

Prof. Saasa, has nailed it all. Only these fools, cannot understand what is going on with the economy. Mwanakatwe is not a suitable person to be the heading the ministry of Finance.

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