Africa Confidential reports that the government of Zambia has failed to pay the initial €6 million of the €97 million loan repayment to an Italian bank, borrowed to buy two military planes.

And Africa Confidential reports that $20 million, of the $50 million Ministry of Education funds suspected of being embezzled, which has so far been audited, indicate that around 90 per cent was misappropriated.

In an article titled “Little cash, no credit” published, Thursday, Africa Confidential reports that the €6 million payment represents the first instalment on €97m Zambia borrowed to buy two C-27J twin-engined military transport aircraft.

“The liquidity crisis continues while the exchequer has a different kind of problem with liquids to deal with. The government’s chronic shortage of cash has resulted not only in late payment of salaries for public servants, but also in a four-week default on a large loan repayment for new equipment for the armed forces, Africa Confidential can exclusively report…The latest loan repayment to be missed is €6 million to the Italian bank Intesa Sanpaolo which fell due on 30 April, according to financial sources in Lusaka. The payment represents the first instalment on €97m Zambia borrowed to buy two C-27J twin-engined military transport aircraft. The aircraft have not yet arrived in Zambia, but almost all of the loan was disbursed in December directly to the manufacturer Leonardo, we have learned,” read the article.

“The government denies that such loans are a drain on its finances, often at the expense of vital public services and public servants’ pay, but critics point to military equipment as a perfect example of expensive goods that can generate no economic returns. Intesa Sanpaolo has not yet publicly declared the loan repayment in default, which would have serious consequences for other loans and the Eurobonds Zambia has issued. We understand that the Ministry of Finance is now processing the overdue payment, although it is taking an unusually long time for the funds to reach the bank.”

Africa Confidential also reported that government failed to published a Debt Sustainability Analysis which was expected a year ago because it failed to prove that the country’s debt was sustainable.

“The government was already struggling to meet its debt service payments when the Italian loan was contracted, and it came as Mwanakatwe announced austerity measures that were meant to halt all but essential further borrowing. The test of that policy was supposed to become clear when the government published its Debt Sustainability Analysis, expected a year ago. But the paper failed to bear out the claim that the debts were sustainable in the short term, we hear, and it remained under wraps,” read the report.

And Africa Confidential reported that the United Kingdom’s Department for International Development was contemplating asking the Zambian government to pay back some funds identified as missing since the audit on some projects was taking too long.

“While the investment climate remains poor, confidence is not high among donors. The audit of over $50m in Ministry of Education funds suspected of being embezzled is testing the patience of those who provided the money. Of the $20m audited so far, indications are that around 90% was misappropriated, according to sources involved in the audit. The United Kingdom’s Department for International Development is believed to be contemplating demanding repayment now of the funds already identified as missing because of the length of time it is taking to complete the audit,” Africa Confidential reported.

Africa Confidential predicted that the implementation of Sales’ Tax would cause more problems.

“The government has been issuing reassurances and defiantly denying the existence of a crisis. At the same time, Finance Minister Margaret Mwanakatwe is being called into question over allegations that she is often drunk. One response to the liquidity problem has been to suddenly raise new taxes on mining companies, and fears over nationalisation of foreign-owned assets are growing. Neighbouring Congo-Kinshasa drew loud protests from its mining companies when it imposed new taxes early last year but despite threats of legal action and investment strikes, the companies eventually fell silent. President Edgar Lungu will be hoping for the same,” read the Africa Confidential Report.

“The kwacha has also rapidly declined in recent weeks to stand at around 14 to the US dollar, leading the Central Bank to raise its benchmark interest rate from 9.75% to 10.25% in a bid to stabilise the currency.”