Finance Minister Dr Bwalya Ng’andu says the current debt stock is a reflection of the Patriotic Front’s ambitious infrastructure development agenda.
And Dr Ng’andu has clarified that the increase in the overnight lending rate by the Central Bank will not translate into high lending rates on the market, but will only affect inter-bank lending rates.
Winding up debate on his ministry’s 2020 budget, Tuesday, Dr Ng’andu said Zambia’s debt needed to be consolidated.
He, however, noted that it was a reflection of government’s ambitious development agenda.
“In terms of loans and the contraction of debt, His Excellency the President came to this House, addressed this House and admitted that the level of debt has reached a point where we should begin to consolidate it and begin to manage the existing stock of debt and he has issued very clear instructions to me as Minister of Finance to begin on the issue of managing the current debt stock and that is what is going on right now. A number of measures are being undertaken, right now we have the IMF visiting us and at the same time, the World Bank debt team is working with us in beginning to first validate the stock of debt, both domestic as well as external, and then carefully working our way through restructuring and consolidating the debt. I do admit that the debt contraction reflected the ambitious program of trying to deal with the infrastructure deficiency that this country has suffered,” Dr Ng’andu said.
“Before PF came into power in 2012, you can go back 20 years before that, what was happening in the area of infrastructure development, not much, not much at all so there was this huge deficit which needed to be attended to. So if the PF government is guilty of any crime, I think it’s the crime of being ambitious of trying to fill a gap that had existed for so many years. And I as I said before, measures are being undertaken to manage the current debt problem and we will continue to do so until we achieve the objectives that we want to achieve.”
Dr Ng’andu also justified the multitude of road projects in the country.
“I think by and large we can all agree that building power stations is a priority, building schools for this country is a priority and I am sure we can all agree that building hospitals, building health centers is a priority. The issue of roads is paramount. In this House, one of the most recurrent questions that the minister of infrastructure is asked is ‘why is my road not being done?’ ‘When are you doing my road?’ and it is important that these questions, because roads have a tendency of multiplying distance between two points, if it’s a bad road, distances will multiply, if it’s a good road, distance shrinks. But also, roads impose a limit on what can be done in the rural areas. One of the challenges, one of the reasons that rural agriculture is suppressed, one of the reasons why it’s difficult to do rural business is because the roads are bad. So when we are talking about roads, we are talking about a priority area and if we all agree that these things are priorities, the things that I have mentioned, then I think there is very little for us to argue that government has lost its priority,” he said.
Meanwhile, Dr Ng’andu said the lending rates on the market would still at 26 per cent.
“My good friend honorable [Situmbeko] Musokotwane raised the issue of the Bank of Zambia raising the (overnight lending facility) rate which will have an impact on supposed lending rates in the market, but I just want to remind my brother who is, as you know, a central banker that what the Central Bank has done is to raise the overnight lending rate. Now, the overnight lending rate doesn’t necessarily translate into high lending rates in the market. I am sure the honorable understands the transmission mechanisms that in this country, transmission mechanism from the overnight lending rate will probably end up affecting the interbank rates but beyond that, it may not. The important thing is that the policy rate has remained where it is, the policy rate is still 10.25 and the actual lending rates on the market are still 26 per cent. So just recall that the transmission mechanism in this country is not as straightforward as it is on other economies but we will see if we will get there,” said Dr Ng’andu.