ECONOMIST Trevor Simumba says government should not outsource advisers to help them negotiate debt restricting when Zambia has enough eminent citizens capable of handling the task.
Speaking when he featured on Capital FM’s Counting the Cost Radio Programme, Thursday, Simumba advised government to utilize the former Bank of Zambia governors and former finance and commerce ministers who wrote a letter to President Edgar Lungu over Zambia’s debt situation.
“The sinking fund is just a word that the previous Finance Minister and this minister continue to use, it is nothing. I don’t even know if there is US$10 million in that sinking fund, it is useless. In terms of the Eurobond, our first bullet payment is 2022. We need to pay about $750 million so at this moment, we can’t. Half of the current reserves, because our current reserves are about 1.4 billion, and so are you going to take half of your reserves to pay off a debt? We are in crisis. That is why out of desperation our Minister has written to the same people who lent us the money asking them to advise on how to restructure, how naive can one be?” Simumba wondered.
“The timing is totally wrong because other international financial consultants are saying ‘how do you submit a request for proposal to this big international bank, how do you send it at a time when these international financial banks are focused on supporting the US government, the UK government and other European countries to deal with the COVID crisis’? Because the US government has a stimulus package of US$2 trillion, they have to borrow that money. It’s not all coming from tax payers, they have to go to the market. What the Minister of Finance should have done is put together an eminent team of people. We have got a team of people who wrote that letter, sit them down and then have them go and help to sit with the IMF when IMF sees a former Governor, they respect his opinion more than the current minister because he has political issues as well and these people know that. Don’t pay money to these foreigners who are going to advise you the wrong things.”
And Simumba observed that government delayed to impose a travel ban.
“What we need to do now in terms of the financial side or the economy side is for the government to seek help because we will not be able to raise our resources ourselves. What steps would have been taken to protect our fragile economy? There’s very little you can do. Once COVID hits you, there is little you can do. For example, the President of the US as soon as the Wuhan crisis started, he posed travel restrictions for people coming from China. However, where did the COVID come from? It came from Europe and remember, he fumbled that he banned flights from Europe but left UK and Ireland intact and then a few days later, he had to include them and a few days later he completely closed the flights coming in. So for Zambia, when COVID-19 hit us, I think we were a little bit slow in imposing restrictions on travel particularly from travel coming from high risk countries. I think we should have quickly imposed a travel ban,” he said
When reminded that government had argued that imposing travel restrictions was tantamount to xenophobia, Simumba said that was nonsense.
“That was wrong, that is nonsense! In Gambia, the first case that they had was on March 18 of a French tourist and Gambia, 30 per cent of its GDP comes from tourism, they depend on tourism. Within two days, the Gambian government decided that were stopping flights from Spain, Italy and Netherlands, they maintained the UK. Then they announced that all foreigners in the country should leave within 48 hours and that Gambian airspace was going to be closed. So you can’t say its xenophobic. We should have imposed [a travel ban quickly],” he said.
Simumba hoped that government had learnt the importance of maintaining healthy reserves.
“The main arm that can deal with this issue from an economic and financial place is not the Bank of Zambia. We shouldn’t put that kind of pressure on them, it is the Ministry of Finance. This should be a lesson to the Zambian government that running down your reserves is not the way to run the economy because right now because of the fact that our reserves are basically useless, they are nothing. At this moment, we cannot maneuver in any way without external help because of the huge debt and the huge debt servicing that we are having to pay especially with the depreciation of the Kwacha, we can’t even defend the Kwacha. The Bank of Zambia has no ability right now to intervene in the foreign exchange market, they don’t just have it,” Simumba said.
He said there was need for government to consider a tax holiday for stressed businesses.
“We need the government to consider some kind of tax holidays in particular for those very stressed businesses because it will be very difficult for them to come back up and they will need cheap capital and they will need some support to ensure that they can maintain their workers. Isn’t it better that we save the little jobs that we have than loose more jobs and have unemployment that means less tax base for the government so the government needs to have a give and take attitude. We cannot maintain the status quo. And following this crisis, government must become very serious about empowering Zambian businesses and we must ensure that all these big retail chains begin to purchase more from local suppliers so that 60 percent of their supply should be local,” said Simumba.