AC says $25m debt has forced medical suppliers to stop providing drugs to Zambia

Africa Confidential says the three biggest pharmaceutical suppliers have stopped providing basic drugs and equipment because the Zambian government owes them US$25 million.

And Africa Confidential says Finance Minister Margaret Mwanakatwe’s recent statement assuring that the announced US$8.7 external debt stock figure was accurate only

In its latest report, Africa Confidential stated that Health Minister Chitalu Chilufya had asked donors to reinstate basket funding.

“The three biggest pharmaceutical suppliers have stopped providing basic drugs and equipment because the government owes them $25 million. On the brink of a nationwide shortage of medicines, Health Minister Chitalu Chilufya has asked donors to reinstate basket funding – a request met without enthusiasm, we hear. He has also written to President Edgar Lungu to request emergency funding, which is likely to come from toll-gate revenues,” Africa Confidential stated.

“Meanwhile, the Ministry of Health is pursuing an ambitious expansion programme that includes borrowing hundreds of millions of dollars for new hospitals, as well as suspiciously expensive procurement through politically connected middlemen, including 50 ambulances at the cost of $288,000 each. Toyota, the manufacturer of the ambulances, reports that each was worth just $60,000. The price inflation, suspected to be for the purposes of skimming commissions, could have paid off almost half of all the outstanding debts to health suppliers and ensured that public hospitals remain stocked with vital medicines.”

And Africa Confidential stated that the Zambia Revenue Authority had identified the mines as an easy source of income as they had been subjected to aggressive auditing.

“Zambia’s cash-strapped government is trying to muddle through the financial strain of managing a fast-growing pile of debt using a combination of aggressive taxation and not paying suppliers. The strategy is driving up domestic arrears and antagonising business at a time when investors are already thinking twice about putting money into the country.
In March, the government apparently tried to solve the impending crisis by publicly demanding that the Canadian mining company First Quantum Minerals pay Zambia US$8 billion. The Zambia Revenue Authority (ZRA), which owes FQM $160 million in overdue VAT rebates, told FQM it had five days to pay roughly $142 mn. in duties plus billions in fines and interest, levied at 5% since 2012,” read the report.

“FQM maintains that the demand is unfounded and the firm has been granted three months to conduct its own audit. Insiders tell AC that the ZRA’s claim of missed duty payments is mistaken and that tax-exempt goods have been wrongly reclassified in a whirlwind audit. The ZRA sees duty payments as a fast way to raise cash and the mines as easy targets, but even sources close to the government are privately critical of the ZRA’s assault on FQM. Although no other mine has been hit with a bill of the magnitude of the one presented to FQM – the government’s biggest taxpayer – the mining companies are now subject to aggressive auditing.”

Meanwhile, Africa Confidential alleged that President Edgar Lungu shunned the Commonwealth summit to avoid questions on Zambia’s ballooning debt.

“As leaders of the 53 Commonwealth member states gathered in London for the 15-17 April summit, one African head of state was conspicuously absent. Amid growing concern that Zambia’s debt has ballooned to unmanageable levels on his watch, President Edgar Lungu keeps out of the international spotlight (AC Vol 59 No 7). His country is on the brink of crisis and the slide in the economy is damaging the copper-rich nation’s bargaining power. Under fire from opponents – and, increasingly, from members of his own governing Patriotic Front – Lungu chose to avoid tough questions over both the debt debacle and his failure to begin dialogue on political reforms with opposition leaders, as previously agreed with the Commonwealth Secretary General, Baroness Scotland,” read the report.

“After a difficult few weeks in which more news broke about Zambia’s rising debt levels, Ministry of Finance officials met with investors in London on 16 April to assuage anxieties. Finance Minister Margaret Mwanakatwe was absent; recent medical problems severely restrict how much travel she does. Instead she flew to Washington DC for the International Monetary Fund’s spring meetings. Mwanakatwe is trying to convince the Fund that the government has the situation under control, in an effort to rebuild trust and secure an IMF-funded programme. Her task is not easy. Confidence in the government’s competence and integrity has hit an all-time low, and opposition claims that Zambian external debt could be as much as twice the level reported by the government are now being taken seriously by investors and analysts.”

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