FINANCE and National Planning Minister Dr Situmbeko Musokotwane says the total government external debt as at June 2021, stood at US$14.48 billion.

And Dr Musokotwane says the growth of external debt from less than $2 billion in 2011 to its current levels reflects one of the worst economic blunders during the last 10 years and has significantly contributed to the suffering being experienced today.

Meanwhile, Dr Musokotwane says by the first quarter of next year, the country should have an IMF programme in place which is going to provide more confidence.

Rendering a ministerial statement on the state of the economy, Tuesday, Dr Musokotwane said the national debt had grown uncontrollably since 2012.

“National debt has grown uncontrollably since 2012. Year in, year out, borrowing has been spiraling out of control even when each year, there were promises made to manage the national financial resources more prudently. The stock of Central Government external debt as at end June 2021 stood at US $12.91 billion. But, as per convention, when we add $1.57 billion of debt by parastatals that government guaranteed to the creditors, the total government external debt as at end June 2021, stood at US $14.48 billion. Madam Speaker, the debt that I have highlighted so far is just the external component. But there is also substantial domestic debt including arrears to suppliers that the government must deal with. This of course makes the situation worse. Very soon, I shall be returning to the House to provide a comprehensive statement on the national debt and the measures being undertaken to deal with it,” Dr Musokotwane said.

He said the growth of external debt from less than $2 billion in 2011 to its current levels of about US$14.5 billion had significantly contributed to the suffering seen today.

“The growth of external debt from less than $2 billion in 2011 to its current levels of about US$14.5 billion reflects one of the worst economic blunders during the last ten years and it has significantly contributed to the suffering we see today: the government was unable to hire key personnel like teachers, the exchange rate depreciating, rising inflation and many more. Let me elaborate on one of the effects of excessive borrowing, namely inflation. It refers to the ever continuing rise in consumer goods and services,” Dr Musokotwane said.

“Madam Speaker, our economy is faced with a number of challenges. Growth has been sluggish, fiscal deficits have been persistently high, debt is unsustainable, inflation is in double digits, the exchange rate has been volatile and interest rates have remained high. The combination of these challenges has brought about sufferings among the people, hence the decision they took to change government. This administration stands by its campaign promise to reverse the sufferings and improve the lives of the people.”

Dr Musokotwane said with the increased inflation, lending rates at banks also increased to an average of 25.6 percent in August 2021.

“You will recall Madam that for many years, inflation was below ten percent per year. However, as at end-August 2021, inflation was recorded at 24.4 percent which is too high and way above the 6-8 percent target band. With the increased inflation, lending rates at banks also increased to an average of 25.6 percent in August 2021. Other than inflation, this was on account of elevated levels of borrowing by the Government. In the past decade, bank lending to the private sector has been stressed as most of the credit was taken up by the government. This must change,” he said.

“For 2021, preliminary estimates indicate that the economy grew by 0.5 percent in the first quarter while growth registered 8.1 percent in the second quarter. Growth is projected to grow by above 2 percent for the whole year. This is on the back of a general improvement in the economy of the world. It is also fair to add, Madam Speaker, that from mid-2021, a number of international initiatives to mitigate the effects of the Covid 19 pandemic permitted Zambia and other poor nations to suspend the servicing of some external debts. In other words, we are not servicing most of the debt as it falls due. This has allowed for more money to remain in the country and therefore was bound to improve the spending power of citizens. Madam Speaker, the overriding economic policy objective for 2022 and the medium term, will be to transform our economy, expand it and create employment opportunities. However, Madam Speaker, we must simultaneously deal with the problem of the excessive national debt without which it will be impossible to normalize the economy, let alone to bring about fundamental economic transformation for job and wealth creation”

Dr Musokotwane said he would soon give the House an update on the way forward regarding the debt problem.

“Later this week, I shall return to the House to give an update of the debt situation of the country and the way forward towards resolving it. It is noteworthy though that Covid merely added to two preexisting serious economic problems in the country. The first is the consequences of the excessive borrowing undertaken by the previous government during the last ten years they were in power. The second cause is the old age problem surrounding dependency on the key mining sector, which in itself has not been managed very well,” he said.

When asked by Lunte PF member of Parliament Mutotwe Kafwaya on whether President Hakainde Hichilema was being truthful when he said the PF left over US$20 billion debt and if indeed they hid the figures, Dr Musokotwane said he would respond to the question later this week.

Asked by Mporokoso PF member of Parliament Brian Mundubile when there would be a turnaround of the economy, the Finance Minister said when the mining issues were resolved.

Meanwhile, Dr Musokotwane said the IMF programme was expected to be in place next year.

“As we move forward, leader of opposition, you will see more. There are steps that we are taking to deal with the debt problem and hopefully by the end of this year, there should be clarity on what is going to happen and hopefully by next year, the first quarter we should have an IMF programme in place which is going to provide more confidence, we should see more money coming in the country to invest. Some of the things we are going to do I think won’t even cost money. Just a friendly environment for the economy,” said Dr Musokotwane.