PF leadership leaves much to be desired, Zambians must prepare for more misery – Catholic body

Screen Shot 2015-07-28 at 21.40.39The  Jesuit Centre for Theological Reflection, a Catholic  body, says the current economic management credentials of the PF government does not inspire confidence and leaves much to be desired. The JCTR says ‘government haphazard way of managing the economy will create untold misery to the Zambian people.’

Commenting on the latest acquisition of a  US$1.25 billion Eurobond (loan) by the PF government, the Catholic body said ‘repaying these loans will be costly and Zambians must brace themselves for hard times.’

The JCTR said ‘with the recent acquisition of US$1.25 billion through a third euro bond in three years, the country’s debt stock will rise to over 50% of GDP, way beyond the suggested prudent limit of 40% for developing countries. The mounting debt is worrying.’

The JCT said that ‘under the PF Government, the country seems to be caught up between a rock and a hard place. A deficit of over K20 billion, almost half the 2015 budget is too big a hole to fill especially when the country’s income base seems to be shrinking.’

Below is the statement issued by the JCTR Tuesday evening:

Zambia Debt Crisis: A time for tough decisions

When Government announced the revision of the 2015 budget mining tax regime that resulted in an estimated budget deficit of over K20 billion, the writing was on the wall that Government would resort to excessive borrowing. The stage for a borrowing spree was set when Parliament on 25th June 2015 approved the increase in the borrowing ceiling from K35 billion to K60 billion. With the recent acquisition of US$1.25 billion through a third euro bond in three years, the country’s debt stock will rise to over 50% of GDP, way beyond the suggested prudent limit of 40% for developing countries. The mounting debt is worrying.

Under the PF Government, the country seems to be caught up between a rock and a hard place. A deficit of over K20 billion, almost half the 2015 budget is too big a hole to fill especially when the country’s income base seems to be shrinking. On one hand, copper prices and output is said to be lower than was projected by government thereby putting pressure on government revenue. The deficit in electricity supply is further constraining productivity especially in the mining sector and reducing the revenue base. On another hand, government expenditure has remained the same and possibly increased especially with the proposed salary increase of Parliamentarians and Parliamentary by-elections.

The current debt situation does not seem to leave government with a lot of options but to borrow more. However the current economic management credentials of the PF government does not inspire confidence and leaves much to be desired. Government haphazard way of managing the economy will create untold misery to the Zambian people. The three Eurobonds are due in 2022, 2024 and 2025 with the latest bond attracting a premium interest rate of about 9%. Repaying these loans will be costly and Zambians must brace themselves for hard times. Already government has revised various fees and fines upwards in a bid to address the ever growing deficit. The ever depreciating Kwacha and increase in fuel prices continues to exacerbate the cost of living for the majority poor Zambians.

JCTR calls upon government to be magnanimous enough and implement effective short to medium term measures that will address the deficit problem which has been growing each year. Government should tighten its spending on various fronts and take time to strengthen its revenue base and cut down on borrowing. This is indeed a time for government to revise downwards the expenditure side of the 2015 budget in order to bring income and expenditure in line. However, care must be taken not to touch critical social sectors such as health and education. Unnecessary expenditures must be severely curtailed; the President for example must not continue travelling as though the country had a budget surplus and no new projects must be commissioned until the current one are completed. Zambia cannot survive on borrowing but should exercise prudence and live within its means. There is too much waste of resources in this country. A small self-financed budget is better than a blotted one financed from borrowed resources. The fact that government failed to raise the US$2 billion it initially sought to raise through the recent Eurobond could be a reflection of the country’s waning credit worthiness. The time to act therefore is now.

Share this post