FORMER Minister of Commerce, Trade and Industry Dipak Patel has petitioned the Constitutional Court over government’s failure to obtain prior approval from Parliament before contracting national debt.
And Patel has written to the Minister of Finance, contesting that all the loans signed since the Constitution was amended in 2016 did not get approval from parliament.
According to Ministry of Finance records, government contracted a total of US$4.3 billion in loans between January 2017 and December 2018, non of which were approved by Parliament as per law requirement.
Patel who has cited the Minister of Finance and the Attorney General as first and second respondents, says he believes the said failure and neglect by government is being done for political expediency to prevent public scrutiny of how loans are obtained and utilised.
He added that Zambia’s debt position was not known as the correct figures of how much debt had been contracted since 2016 had never been provided to the National Assembly or to the Public.
Patel is therefore, seeking a declaration that the respondents’ failure to present all loans contracted and sought to be contracted on behalf of government which constitutes public debt to the National Assembly for prior approval, is in breach of the Constitution.
He also wants an order compelling the respondents to present to Parliament, within 14 days of the Judgment of the Court or within such other timeframe that the court may prescribe, a full and complete statement of the state of public debt contracted from 2016 to date including the terms and conditions of the loans.
Patel further wants an order directing that from the date of the Judgment, all public debt, whether local or foreign, sought to be contracted on behalf of the government must be presented to Parliament for prior approval.
In his petition filed in the Constitutional Court yesterday, Patel, a former member of parliament for Lusaka Central Constituency from 1991 to 2006, stated that he held various Cabinet portfolios including Minister of Commerce.
He stated that as a Zambian citizen and tax payer, he was affected directly by any debts that the respondents authorise and sign on behalf of government and as such he had the requisite standing to bring the claim before the Constitutional Court.
“With the amendment of the Constitution of Zambia, Chapter 1 of the Laws of Zambia in January 2016, which gave rise to the Constitution of Zambia (Amendment) Act No. 2 2016, there is now a mandatory legal requirement in Article 63(2)(d) of the Constitution of Zambia (Amendment) Act. No. 2 of 2016, for the National Assembly to approve all public debt before it is contracted. This oversight includes scrutinising public expenditure including defence, constitutional and special expenditure as prescribed in Article 63(2)(c),” Patel stated.
He added that the Minister of Finance was not permitted to contract any public debt without first obtaining prior approval of the National Assembly.
Patel stated that the approval ought to be obtained through the Attorney General presenting necessary bills for contraction of debt prior to any execution of any debt procurement agreements regardless of how they were termed.
He stated that since the amendment of the Constitution in 2016, the respondents had to date not sought any approval from the National Assembly prior to signing loan agreements for contracting local and foreign public debt.
“The second respondent has not signed any Bill for presentation to Parliament to scrutinise and approve the procurement of any debt procuring instruments that have been approved by the said second respondent in his capacity as chief legal advisor to government,” he stated.
He stated that there was no doubt that from 2016 to date, government through the respondents had contracted numerous foreign and domestic loans and the attitude had been that Cabinet had the authority to approve such loans without need to obtain approval from Parliament.
“This is borne out by the ministerial statement that was issued by Honourable Mrs Margaret Nlwanakatwe (MP) in her capacity as the then Minister of Finance in the National Assembly on September 19, 2018, in answer to a question posed in Parliament by Honourable Dr Christopher Kalila, the Lukulu East Member of Parliament, where she stated that she did not understand why there was insistence on parliamentary approval before contracting debt when there is an able Cabinet to do so,” the petition read.
“This position has not changed to date as the loan agreements are still not being presented to the National Assembly for prior approval before signing. The Respondents have continued to operate as if the Constitution has no such requirement.”
GOVT CONTRACTED $4.3 BILLION IN LOANS BETWEEN 2017 and 2018
In a letter to the Minister of Finance Dr Bwalya Ng’andu, dated 10th March 2020, Patel questioned why the Ministry was violating the constitution by contracting loans without legislative authorisation.
“Hon. Minister, transparency in governance calls for the schedule of loans that have been contracted by the Government to be published, and the Constitution requires that, for borrowing contracted since 2016, that this information be supplied to the National Assembly. The absence of details of the individual loans that have been contracted during this period, borrowing, information that is available on total loans outstanding, and detailed data on borrowing from multilateral organisations and others makes clear that the Loans and Guarantees Act and the Constitution have been violated by Government’s contracting new loans without legislative authorisation,” the letter read.
“Hon. Minister, in your role as a constitutional officer of Zambia, it is your duty to publicly respond to the reports on loans contracted without the authorisation of the National Assembly. In maintaining Zambia as a nation of laws, it is critical to the future of our nation that you immediately explain how you intend to address this situation, within the next seven days. As this is a matter of public interest, I reserve my right to take this matter to a Court of Law and seek judicial guidance on the same.”
He further questioned why budget yellow books since 2017 do not list contracted loans but only list the draw-down of already contracted loans.
“Hon. Minister, consistent with Constitutional requirements, the Loans and Guarantees (Authorisation) Act provides you with the authority to raise loans (other than Development Bonds and borrowing from multilateral institutions, which are governed by separate Acts) that prescribed by statutory instruments approved by the National Assembly. Thus, the contracting of debt without such authorisation is outside of the law, and in contravention to the Constitution. The Budgets “Yellow Books” of 2017,2018,2019,2020 do not list contracted loans and list only the draw – down of already contracted loans. Hon. Minister, there is no Parliamentary record in the Daily Debates and Proceedings in the National Assembly that shows that any Minister of Finance has ever brought any loans or financing agreement that constitutes a public debt to Parliament for its approval since the Constitutional Amendment Act No.2 of 2016,” read the letter in part.
“Hon. Minister, in your February 20th , 2020 Statement on the State of the Economy” you indicated that the loan debt stock had increased to US$11.2 billion and further indicated that a Cabinet Memorandum that was considered by Cabinet on 20 December 2019 directed, among other actions, a moratorium on the contracting of external project loans. This followed the commitment in your 27th September 2019 Budget Address to the National Assembly to “slow down external debt contraction”, “cease the issuance of guarantees” and “refinance existing loans”. If it is correct, Bloomberg reported on 3rd March 2020 that Zambia has signed a US$825 million loan with China Railway Construction Corporation, yet again, without Parliamentary approval.”
According to Ministry of Finance data, loans contracted in 2017 amounted to US$1,750,849,448.15 and include: From Standard Chartered Bank, US$134,000,000 for a placement agreement, International Development Association (IDA), US$134,000,000 for eastern and southern higher education, International Development Association (IDA), US$47,800,000 for mining and environment improvement, International Development Association (IDA), US$29,200,000 for the agri-business and trade project, Star-Times, US$41,000,000 for terrestrial and television systems (15%), International Fund for Agricultural Development (IFAD), US$15.500,000 for the enhanced agri-business program, Citi Bank UK branch, US$78,600,000 for the safe city project.
Others are INDU Com Bank Chin, US$59,580,194 for Ndola Airport (15%), EXIM Korea, US$41,532,000 for the public safety information system, EXIM India, US$245,740,000 for the traffic decongestion project, EXIM China, US$280,764,601.55 for communication towers, Israel Discount Bank, US$400,000,000 for defence project, UBA, US$84,784,497 for the supply and delivery of 80,000 metric tonnes of fertilizer, Investec Bank, US$165,406,758.60 for the Maina Soko Hospital upgrade, Bank HAPOLIM B.M, US$55,636,397 for defence project, Standard Chartered Bank, US$44,900,000 for the Lusaka decongestion project (15%), BADEA, US$10,000,000 for the cancer treatment centre and Israel Development Bank, US$7,705,000 for a defence project.
In 2018, Ministry of Finance data does not state the purpose of the loans but only shows the source as listed below: Bank of China, US$36,165,913, European Investment Bank (EIB), US$110,000,000, EXIM Bank of India, US$19,800,000, EXIM Bank of China, US$907,881,958, EXIM Bank of Russia, US$272,876,396, International Development Association (IDA), US$76,100,000, Industrial and Commercial Bank of China, US$401,447,794, Intesa Saopaoo Bank, US$96,948,571, Isreal Discount Bank, US$66,578,352, Nedbank, US$45,000,000, OPEC Fund for International Development (OFID), US$12,000,000, Saudi Funds for Development, US$375,000,000, Standard Chartered Bank, US$113,010,480 and BNP Paribus Furtis SA, US$103,629,845 bringing the it to a total of US$2,636,439,309.