Finance Minister Margaret Mwanakatwe says she does not understand why government has to seek Parliament’s approval when contracting loans when there is already an able Cabinet to do so.
And Mwanakwatwe has also acknowledged that Zambia’s debt levels have become very high, saying there is need for every stakeholder to work extra hard in order to increase the revenue base.
Mwanakatwe was speaking in parliament when she issued a ministerial statement, Wednesday.
“Your (Lukulu MP’s) request that this House oversees the debt contraction, Mr Speaker I don’t understand. I come to this Parliament with a budget and all sealings are agreed by this House. If there is a supplementary to be submitted, this House approves that supplementary. We have a very able Cabinet as well that approves all loans before it is contracted. So I think there is transparency and there is prudence in the manner in which we have contracted loans because collectively as a group of Cabinet ministers, we scrutinize every single loan that comes into fruition,” Mwanakatwe said.
She also admitted that debt levels had gone high.
“Let me confirm to this House and to the nation that government is not in debt distress. Government is paying its debt as and when they fall due. Yes the debt has gone up but we have to work harder, all of us. We have to increase the revenue base to ensure that we can satisfy the demands of our people. This is a big country with a lot of needs,” Mwanakatwe said.
Meanwhile, Mwanakatwe dismissed claims that government had pledged some public asset as collateral.
“Mr Speaker, [the] past few days have seen high levels of public interests regarding ceding of strategic assets owned by the republic to foreign creditors. Let me take this opportunity to inform the house and the nation that government has not pledged any public asset as collateral on borrowings [that] it has undertaken. All loans are secured through several ways, firstly, through government guarantees for those borrowings related to projects in parastatals and quasi government institutions. Secondly, through insurance for loans taken by government itself, parastatals, and quasi government institutions where applicable; and thirdly, no security for direct borrowing by the republic as the law does not provide for such,” she said.
“The stock of external debt was us$ 9.37 billion. This represents 34.7% of GDP and was below the internationally agreed threshold of 40%; the stock of domestic debt, in form of government securities, was K51.86 billion. This represents 19.2 % of GDP. Kindly note that there is no threshold defined internationally on domestic debt. However, the threshold for the combination of domestic and external debt is 56% of GDP. Against this threshold, Zambia’s combined ratio was 53.9% of GDP; the stock of arrears stood at K13.9 billion or 5.1% of GDP; and, the total stock of guarantees were us$1.2 billion or 4.4% of GDP.”
In her statement, Mwanakatwe further explained that there had never been any discussions between government and China on asset swapping.
“In view of this, it is clear that no collateral in the form of public assets has been provided for borrowings and none of the sovereign guarantees has been called upon by the creditors. Therefore, the takeover of any asset by another government is neither practical nor feasible.Through you Mr. Speaker, the nation is informed that there has never been any discussion related to a debt/asset swap between the Zambian government and any of its creditors, china inclusive,” she explained.
She insisted that government was on course in terms of repaying its debt.
“I would like to assure the house and the nation at large that government takes seriously issues of debt sustainability as a practical step towards ensuring that we are sustainable. I would like to assure the honourable members that the government has not defaulted on any of its external commitments and that it does not intend to do so. We are very much alive to the serious repcutions of any default of the economy and on any other borrowing [that] we have made through the cross default clauses contained in financing agreements. It is our undertaking that we abide by the provisions in our loan agreements by ensuring that we do not abrogate the provisions of our constitution that ranks borrowing as a priority constitutional core on our revenues,” Mwanakatwe assured.
“There has been no debt default by the republic of Zambia on debt obligations to the Chinese government or to other lenders. The loan at the Kenneth Kaunda international airport [KKIA] is still being disbursed by the lenders. In this regard, we have not yet started repaying the loan because the new airport terminal is still under construction. Zesco loans from Chinese lenders relate to the extension project for the Kariba north bank power station and the Kafue gorge lower power station construction project, which two stations are independent of Zesco. Zesco only holds shareholding interest in the two power stations through separate special purpose establishments. Loan repayments for the Kariba north bank extension project are duly on course while loan repayments for the Kafue gorge lower power project have not commenced because the station is still under construction. With regard to the digital migration programme, a loan was obtained from china to ensure that the programme is implemented in the country. Government is servicing the loan and is on course with debt servicing. Zambia national broadcasting corporation (ZNBC) was never offered as collateral for the loan. Instead, ZNBC and star times of china created an independent special purpose vehicle called top star to implement the digital migration programme.”
Meanwhile, Mwanakatwe asked Zambians to stop peddling lies about the debt situation of the country.
“Any well meaning Zambian peddling falsehood about Zambia really should be ashamed because we only have one Zambia. You can’t even imagine what peace costs. The peace that we enjoy is a fantastic asset. Why would anyone want to making the country look like it is on fire? So this Mr Speaker is my earnest plea to any well meaning Zambian to safeguard what we have. Let’s not put this country on unnecessary fire. Let’s stop sending falsehood,” said Mwanakatwe.