FORMER finance minister Ng’andu Magande says bondholders’ refusal to accept suspension of Eurobond interest debt repayment has put question marks in the 2021 budget.
And Magande says without clinching an IMF bailout package, no lenders will want to deal with Zambia.
Meanwhile, Magande has insisted that government should call for a national meeting to discuss how the debt will be paid back.
On Wednesday, the Zambia External Bondholder Committee said its members were unable to provide a positive response to the Zambian government’s Consent Solicitation request to suspend Eurobond interest debt repayments given the absence of clarity.
And in an interview, Magande said Finance Minister Dr Bwalya Ng’andu should have sought President Edgar Lungu’s permission to postpone the budget presentation so that he speaks to the creditors first.
He observed that the 2021 budget was now in limbo.
“What was I expecting to happen is that immediately they set the date of 29th September as the day date for this creditors virtual conference, I talked to somebody informally and said I wish someone could advise the Minister of Finance to say ‘why don’t you agree and go to the boss and tell him ‘sir, I want to hear what the creditors are saying because whatever they say will have an impact on the numbers I put in the budget. Can we postpone the budget to after we have met the creditors because when we meet the creditors depending on what they say if it is negative then it means that the budget has to be prepared with an understanding that we have to raise this money to pay debt’,” Magande said.
“If some of the people will be positive, we can pick those who are positive and say at least 50 percent of the creditors are willing to forgive us. Then we say therefore the budget will also have numbers which are indicating that we might get more money. But if these people come with a hostile attitude then he has to go back to parliament to present an amended budget. So the amount which was said to be paid to foreign debt, is it going to be the exact amount if the creditors are not prepared to give us a moratorium? The budget now has commas and questions marks because some of the numbers were based on what the creditors are going to say.”
Magande said Dr Ng’andu would have taken questions from creditors during the investors call.
“How do you have a meeting where you are addressing the creditors and then you issue a statement and you go away? Obviously, they must have had a lot of questions to ask like ‘how much do you think you are going to save in the next six months?’ That is what I would have loved to hear. Just like at the Paris Club when you address the creditors, after that they also have an opportunity to make comments and ask questions before they even make a reply to the presentation by the Minister,” he said.
“So I expected that the format they were going to use for this whether it is Lazard advising them, they could have said what is the format, it would have provided an opportunity for the other people to ask certain questions arising from the Minister’s statement. Now when you leave people like that it means they are not cross-pollinating their ideas. So for some, being the first time we are going through this experience, I think that the government missed an opportunity to know reviews of the creditors and obviously that is a very big omission.”
And Magande insisted that a national meeting to discuss debt repayment was essential.
“This simply means we have to find the money to pay. And I remember an analysis from someone after the budget presentation that we are supposed to be paying something like US$800-900 million per year on interest rate. Where will we get that kind of money to pay? Which is about US$ 1 billion every month? These things should not be partisan these things are national. So if you call a national meeting and you know some people who have been involved in that sector and they come together, you will even hear views of somebody who is from Lumwana, or Livingstone then you set a better understanding of what your citizens are fearing. Because it is us now who have to start saying ‘but if government does not have the money to pay debt how will I go to the bank and get money?’” Magande asked.
“Because the commercial banks will just be commandeered to surrender all the money and foreign currencies to the Bank of Zambia for the government to meet their obligations. It is not a healthy thing. Some of us have never lived through such a period. Perhaps the people that are trying to solve the problems they are getting expert advice from those who have gone through it but then we also want to be educated on how these things are done.”
Meanwhile, Magande said if Zambia did not have a package IMF, no one would be willing to deal with the country.
“The truth of the matter is that the other donors, the Paris Club and individual countries cannot do anything if the IMF which is an International financial supervisory body does not deal with us. Nobody will deal with us. All these bilateral donors are going to be having Independence day celebrations receptions and at those receptions they will issue diplomatic and nice statements. But until their countries and their board members who sit on the IMF can say ‘go and talk to Zambia on this’ they will not do anything. It will just be diplomacy. These Ambassadors are trained in diplomacy to go and say nice things even when they don’t mean it. If we have no package with the IMF , nobody is going to ever make a proposal that they meet us outside the boardroom of the IMF,” said Magande.