UNLESS debt is addressed, we are building a house on a foundation made out of clay, says former finance minister Situmbeko Musokotwane.
Commenting on the 2019 budget in an interview, Musokotwane, who is also Liuwa UPND member of parliament, Musokotwane lamented that rather than reducing debt, the 2021 budget was increasing it.
He said this would mean the exchange rate could be worse than K20 to a dollar.
“For all those promises that we have heard, unless the debt issue is addressed, all those promises will end up zero, nothing will happen. It is paramount that the issue of the debt is addressed more seriously. The fundamental problem the economy is facing is that of debt and this budget doesn’t reduce debt, it is increasing debt. By increasing debt, you can be assured that the exchange rate is again going to get into pressure. The K20 to the dollar is going to increase to something worse. If there are youths out there trained as teachers waiting to be deployed in government, it will not happen because the money which is supposed to pay their salaries is going to service the debt,” he said.
“Unless we address the issue of debt, even the employment opportunities will remain depressed. So the debt management is the foundation of all the issues about the economy now, unless it is addressed, then we are building a house on the foundation made out of clay.”
Msokotwane said there was no sufficient recognition and acknowledgement of the debt problem and how it was affecting the budget and the economy.
“There is not sufficient recognition and acknowledgement of the debt problem and how it’s affecting the budget and the economy. What is being projected is COVID-19. I say so because on one hand, if you read the relevant parts of the [budget] speech, the minister was talking about how they have cancelled some loans that were in the pipeline and so forth, that is fine. But my quarrel about the budget is that the deficit still remains very big by historical standard and also by international standard. The fundamental issue of reducing the debt is not being addressed in this budget because debt is increasing because the deficit is bigger. Automatically when the deficit is big, it means more borrowing at the time when we should reduce the debt,” he said.
And Musokotwane also noted that allocations to the health and education sectors in the budget had continued to reduce while the money going to debt servicing was increasing.
“The allocations going to health and education, if you look at periods from 2012 to now, those allocations are getting less and less while the allocation to debt servicing is getting more and more. If most of the money goes to servicing the debt, it means you can only get that money by reducing health, reducing education, the very thing that we should be funding even more. But shares of education and health are declining in the national budget,” said Msokotwane.
On Friday, Finance Minister Dr Bwalya Ng’andu announced that government will spend K119.6 billion in 2021, with more than K27 billion of that amount due to be spent on servicing Zambia’s external debt.
Announcing an unprecedented K119.96 billion 2021 budget, which translates to 32.6 per cent of Gross Domestic Product (GDP), Dr Ng’andu announced that of this amount, K68.0 billion, representing 18.5 per cent of GDP, will come from domestic revenues and grants, while the balance of K51.6 billion is due to be raised through financing, which includes loans and grants.