FORMER Finance Minister Felix Mutati says the solution to Zambia’s debt crisis does not lie in deferment of debt service as suggested by the multi-laterals and the G-20, but a complete write-off of whatever the country owes.
And Mutati has welcomed government’s decision to downsize the 2020 national budget following the drastic reduction in the country’s revenues.
Commenting on Finance Minister Dr Bwalya Ng’andu’s announcement that government had engaged lenders to have some debt, especially undisbursed loans, cancelled as a way of reducing the debt burden, Mutati said the best way to deal with the country’s debt was through a HIPC-style relief.
“There have been calls for debt relief, particularly by the G-20, that the debt servicing be deferred for somewhere around one year. But our circumstances as Zambia and the rest of Africa would require that we go beyond the deferment of debt servicing to a HIPC-style relief, which has been supported by senators and a number of members of parliament, globally. So, the call that we should reinforce is the HIPC type, it is the only thing, which is going to answer to issues around our debt sustainability and provide us a chance to move from an economy, which is contracting, to an economy that begins to recover. Deferment of payment will not give us that result, no matter how and what we basically do,” Mutati said in an interview.
“So, in this regard, I would call upon civil society and church organizations to do what they did during the days of HIPC; raising the levels of consciousness of the lenders that, ‘you need to provide a cure to the disease’ rather than a mere relief to the disease. So, in effect, we are asking for a vaccine and that vaccine is a HIPC-style of debt relief. The point that we should make is that in as much as efforts and resources are being deployed and invested to find a vaccine for COVID-19 as an ultimate answer to eliminating COVID, the same vigour should be extended to debt, it also requires a vaccine of debt write-off because that is the ultimate answer. Anything else in between will not provide you with the ultimate answer. So, our vaccine for debt is write-off. If the world has raised over US $9 billion to deal with issues around a vaccine [for COVID-19], I am sure they can raise the level of resource to write-off some debt.”
Mutati insisted that the country’s debt required a complete cure through write offs and mere reliefs of debt deferment.
“This is debt, which is mainly bilateral and multilateral, it doesn’t involve commercial debt because commercial debt you deal with it totally different. And as you know in our debt, a significant component is commercial debt. So, what we are asking for is much, much lower. And when they write-off, obviously, there is a provision where they (lenders) can say, ‘do I write off 100 per cent’, whatever combination, that will be the ultimate vaccine, otherwise, anything else will be that we remain with the disease for a long time to come. So, do you want us, as a people, to be carrying this burden of disease for a long time to come? So, really, the call is to say, everybody has the problem, but the answer is in providing a cure and not just treating the symptoms like what is happening,” he added.
And Mutati welcomed government’s decision to readjust the 2020 national budget.
“Given what is being defined as the new normal, this new normal has impacted significantly on all the economic fundamentals. Therefore, it becomes indispensable for the 2020 budget to be revised. COVID-19 has battered the budget equation at both the revenue and the expenditure front. The Minister [of Finance] has taken a realistic approach in re-booting the 2020 budget so as to cease the opportunity to reprioritize, particularly expenditure and give economic direction,” he said.
But he projected an extremely tight revised budget, going by Dr Ng’andu’s projections.
“Earlier on, the Minister was projecting that revenue would be down by close to K29 billion this year alone. So, if you are out of pocket for K29 billion, the consequences are that you will not be able to finance your expenditure lines. So, in revising the budget, what will be done is to say, ‘this is the pot of money that I can raise.’ Then I will look at my expenditure lines and say, ‘no, what do I do with the various expenditure lines.’ But as you know, the bulk of our expenditure relates to salaries and debt servicing. So, the space that is left for everything else is very, very narrow and it will even be narrower with the reduced revenue. So, I don’t have what you may call the exact numbers and I don’t want to be guessing that this is that and that. But only to say that it’s going to be extremely tight,” said Mutati.