IN August this year, President Edgar Lungu said Zambia’s economy was almost shutting down in some sectors due to the COVID-19 pandemic, and so it was imperative that he took control of the situation, as the man in charge. Reacting to this commitment, former Minister of Finance, Ng’andu Magande advised president Lungu to share his economic recovery plan so that well-meaning citizens could help him in the implementation process.
It’s now almost five months, and all the economic indicators are showing that Zambia is straying further away from recovery. Instead of getting better, things seem to be getting worse and the economic indicators are suggesting that the worst is, in fact, yet to come. This is the reason we would like to encourage Zambians to have a real discussion around this issue.
We have noticed that some people in the governing party are feeling confident that the IMF is finally coming on the table to assist the country with a bailout programme. Unfortunately, Zambia cannot run away from the problem that has been created by its leaders. Recovering from the economic ditch that we have plunged ourselves in can only be done by a competent leadership with the deserving financial discipline. There is nothing that the IMF will do for Zambia until Zambia and its leaders accept to reform and a genuine commitment towards prudent use of public resources.
Yes, the IMF has said they are assessing Zambia’s official request for a fund, but there is nothing new in that and it does not bring any hope of relief at all. They said the same in May. The only difference is that they have come to make an assessment and reiterated the fact they they are assessing the request. This just an acknowledgment that the request has been received, and it will be placed on the IMF table for consideration of eligibility.
Like economist Chibamba Kanyamba put it, the rules have not changed. The IMF will still push for disclosure of loan agreements with China; make a commitment to reign in on expenditure by suspending projects; a commitment to stop borrowing without IMF approval. These conditions will of course be tough for President Lungu’s government heading into the 2021 elections.
So from whichever angle we look at this issue, we see that Zambia remains in a very bad position and it needs functioning brains to turn the situation around. Like we have stated in our previous opinion, any fool can spend, but not everyone can make money.
External debt accumulation on commercial terms in Zambia presages repayment spikes, which are combining with short-term domestic obligations to amplify refinancing risk and cause abrupt reductions in public spending; and this has damaging consequences for development.
A rising debt burden is typically less of a reason for concern if it is used to finance investment that raises a country’s potential output, and therefore its ability to repay loans in the future. The problem for Zambia is that borrowing has been used to finance a rise in current consumption. Zambia has many problems, but the biggest issue we have on our hands is debt. That’s the most serious issue. We are concerned that all these political parties that are expressing interest to lead this country are running away from this issue in their debates and manifestos.
Our politicians have all these popular ideas but at the end of the day, we have ended up with a debt mountain of almost US$27 billion now according to the World Bank, and people still have no money in their pockets. We need to have a discussion around this, as we approach 2021.
Our people should be in position to vote for a candidate that has a viable plan on how to address this debt problem. This is what the citizens of this country, including the technocrats at the Central Bank, want to hear. They have sung relentlessly about prudent use of resources, practical implementation of austerity measures, cutting down on borrowing, but this message has been falling on deaf ears. We need leaders who can provide a realistic and honest turnaround plan.