Zambia is headed towards a debt crisis at supersonic speed, economist Professor Oliver Saasa has warned.
And Prof Saasa says the Chinese government’s US $22 million debt cancellation to Zambia is nothing to celebrate because any independent sovereign country ought to meet all of its obligations.
Meanwhile, Professor Saasa says he expects government to be having sleepless nights over getting an IMF bailout package, describing it as mandatory.
Speaking during a CTPD launch of the report titled ‘Weathering the storm of rising public debt: options for public debt management and debt restructuring in Zambia,’ Prof Saasa warned that Zambia was nearing a debt crisis that urgently needed to be addressed.
“One of the issues mentioned was, are we debt distressed? I make a very clear distinction between debt distress and debt crisis. Zambia, presently, I have made this statement before and I have been accused of misinformation, unfortunately, the words as we use them in the conventional language assume different meanings. In the economic segment, whether you like it or not, Zambia is not yet in the debt crisis, but is in debt distress, I had to make this distinction clear. A debt crisis is when you fail to meet your external debt obligations when it falls due and you have defaulted and we have not reached that stage yet. But let me say that, we are moving towards that with supersonic speed towards that status unless something is done and done like yesterday,” Prof Saasa cautioned.
And Speaking in an interview, Prof Saasa, said the move by the Chinese government to write-off more than US $22 million debt should not make Zambia proud.
“Now, should we celebrate over it? Which is another level where we need to be careful; you see, it reminds me of someone who is trying to show appreciation to a level of celebration. I think we should appreciate what China has done so there is no subtraction to that and we should be grateful as a country. But you see, for us this is not something to celebrate about, a debt cancellation is not something where you call someone to celebrate with you. Essentially, when you contract a debt, the intention was to pay. For us, the obligation to meet our debt obligation is mandatory and it gives us a certain stature. When you borrow money, don’t appear to be a beggar and start negotiating for cancellation,” Prof Saasa said.
“A country that is proud of being sovereign should not expect other tax payers in other countries to look after its obligation. Beggars usually come with a cost in terms of image. You know, there is an adage in West Africa that says ‘the hand that receives is always below the hand that gives’, meaning that you are lower, you do not receive from the top, you receive from the bottom. We should really as a country look for earning our own bread and that another country should not do that. Even concessional aid that we want and concessional debt that we talking about now should be done with a view to paying, it should not be done with hope that ‘this person I borrowed money from, I hope is going to cancel it’ because that actually subtracts from your national image.”
He, however, appreciated the move by the Chinese government but noted that it was insignificant compared to the country’s current debt stock.
“I would say we have to be appreciative of the Chinese government for cancelling it but it is not part of the equation of what we are talking about now not only in terms of insignificance because we are looking at US$22 million, we are talking about huge external debt hovering around US$10.2 billion. So you are really talking about the significance is more to do with appreciation,” he said.
And Proof Saasa said getting an IMF deal should be a matter of urgency.
“Investments, both direct and portfolio investments, will start looking at Zambia as a promising country and therefore, you will have investment flowing purely on the back of the IMF program. So because we will not be as stressed as we are now, we are almost depleting our reserves, we are around K1.3, K1.4 billion which is less than 2 months of import cover because of the positivity that will be associated with a country that has a program with the IMF, you will see a lot of macro-economic fundamentals changing in favour of Zambia. That is really why this program is important and that is why government must have sleepless nights. I don’t expect the Minister of Finance to sleep because she is challenged. Because for me, there is no option, it is not even an option, it is an imperative to be seen in that way but it comes with expectations and we know what they are expecting us to do,” he said.
Prof Saasa said he had been ‘singing’ about government’s unfavorable behaviour for so long.
“I said that and I have been one of the ‘musicians’ if you like who has been singing that to government and I have cautioned the government in terms of behaviour. I remember when they arrested and Hakainde, I did caution that ‘when you do this, you may send a signal that shows that our governments’ record is not good and it might delay negotiations’. We have seen when we actually went way beyond in terms of our fiscal deficit, I again cautioned that ‘when we do this, the most likely effect is that the IMF may not be willing to do business with us’,” said Prof Saasa.
“For the IMF, what they want is to attain monetary and fiscal economic equilibrium globally. So they don’t want a country that causes a disturbance because if you cause a disturbance in the global economy, you are likely to affect other countries so they are coming in is to equalise and promote development that does not result into disequilibrium globally…When you have an IMF program, immediately there is an image by the players on the global scene about your country because it comes with certain obligations that expect you to behave in a certain manner in terms of fiscal management.”