IN May this year, Zambia issued a call for financial advisors to help the country in restructuring its debt and managing all loans maturing from 2021 and beyond. This was after a Cabinet decision made in December 2019 to engage financial advisors in Zambia’s quest to strengthen liability management of the debt portfolio. Secretary to the Treasury Fredson Yamba picked a French company called Lazard Freres to provide advisory services on how to handle the country’s debt liabilities at a cost of US$5 million (about K100 million).
Last week, we heard government announce that the country is not able to meet its obligations on Eurobond interest payment, and is asking bondholders to accept a six-month delay, a plea that has since been rejected on grounds that the Zambian government has not been transparent about its actual debt position.
“As part of action taken towards the debt sustainability goal, Zambia is in the process of assessing the proposals received following our recently issued tender request for financial advisory services on asset and liability management of the country’s debt portfolio. The call for tenders has since closed and the process of shortlisting and finally selecting a financial advisor will soon be completed,” said Dr Bwalya Ng’andu in a statement.
When this decision to pay US$5,000,000 to a debt consultant was made, we expressed concern that it was a waste of money. Our issue was that the Patriotic Front regime has had such an insatiable appetite for borrowing that they don’t care about the implications any more.
We warned that no debt consultant could help Zambia out of this situation because the government was not committed to debt sustainability. Our debt portfolio has been a moving target for years. When the Minister announces in the morning that the current external debt stock is US $11.2 billion, by afternoon, that figure has gone up. There has not been any stop to borrowing and there has not been any slowing down in unprioritized spending. So, in our view, there was very little or nothing a debt consultant could do because the default on loans was inevitable.
We do not think that Zambia needed a middleman to tell us how to manage the debt problem, the answer lies in the Cabinet of the Patriotic Front. We warned that the same problem that the IMF has with Zambia is the same problem that this debt consultant would face with Zambia because Zambia’s debt is a moving target.
As we speak today, the government has made a commitment to pay US$5 million to the debt consultant. So the question is, how has that helped us? What are we expecting to benefit from that? Like was stated, Zambia will end up owing, not only the creditors, but the same debt image-builder as well because the debt mountain we have created cannot be dismantled when more loans are being contracted. At the pace we are going, our government will fail to pay the debt consult and it will look for another debt consultant to manage our debt with debt consultants.
The PF debt problems start with the failure to be truthful about how much the country owes. First, the PF government has to show transparency and admit that it has been making mistakes with the endless borrowing which did not even get Parliament approval. Repenting means realizing that too much borrowing is bad, realizing that spending without a plan is wrong. Once they confess their mistakes and demonstrate through action that they have truly stopped the reckless spending, then they will make progress towards debt sustainability.
Now, it is beyond any logical comprehension how this PF government operates. Its addiction to debt contraction and reckless spending is what has destroyed Zambia, nothing else. We simply have an irresponsible government in place which doesn’t deserve to be in charge of public resources.
These years that we are complaining about, where total national debt has moved to US$18.5 billion, have not been campaign years. One can only imagine how much more debt the government will accrue to meet its financial obligations ahead of the 2021 elections. Already, when you look at the budget for 2021, this government is planning to finance about 40 per cent of the budget heads on borrowed money. Which foolish organisation is going to accept to lend money to such a reckless government?