Saudi Arabia oil deal is just another loan

Saudi Arabia oil deal is just another loan

When PF president Edgar Lungu visited Saudi Arabia this week, the country was told that he has struck a deal with that country to supply cheap fuel to Zambia. According to Lungu’s handlers and praise singers, because of this deal, diesel and petrol will be less than K5 per liter starting next week. But the Watchdog believes that this is the usual bullshit from the PF.

Chancer Dora Siliya, who is still clinging on illegally to her former ministry of energy said the US$20-million supply of cheaply-priced fuel will reduce pressure on the treasury and help reduce the fuel pump price.
Siliya told journalists that the five-year concessional financing deal with Saudi Fund for Development is timely because it comes at a time Zambia is grappling with challenges in the electricity and petroleum sectors.

To start with, what the PF is not telling the country is that this is just another loan. Here is how it works; the Saudi Arabian government will lend Zambia US$20-million. Then the Zambia government will buy oil from Saudi Arabia, exclusively, using the borrowed money from Saudi Arabia.

At the end of the contract, the Zambian government will pay back the loan ($20m) plus the interest. Don’t be misled by words such as ‘concessional financing or loan’. These are words crooks use to cheat you into signing their loans with hidden conditions. It does not mean free.  It simply means the loan is less expensive than elsewhere. By this we mean the interest you will pay on the loan is less than, say the interest you will pay from getting a loan from a commercial bank. But even that is debatable.

This kind of exploitation of poor countries by rich countries has happened before. In the early 1970s, Organization of Petroleum Exporting Countries (OPEC), which include Saudi Arabia massively increased the price of oil to the point where poor countries such as Zambia could not afford. But they had it all planned out.  They told their commercial banks to lend these poor countries money to buy oil. The commercial banks gave loans like there is no tomorrow and by the time the oil producing countries decided to reduce the price of oil, all developing counties were in huge debts.

Also remember that Zambia is now rushing to such countries because it can no longer borrow from EU and American lenders because, its credit rating has been downgraded to negative by the main International credit rating agencies. When International crediting rating agencies down grade a country’s economy to negative, it is telling banks and other lenders that this country has no capacity to pay back loans. What this means for Zambia is that it can no longer access money from Eurobonds. There are fears that Zambia will default, that is, fail to pay back the money it borrowed from Eurobonds. And, that is why the IMF is coming in, it is because of this anticipatory default by Zambia on its sovereign loans.

The IMF only gets involved in countries that are in financial crisis. That is why it is called the international lender of last resort. It gives money to countries that are experiencing financial difficulty or are considered highly risky and no other financial institution is willing to lend that risky country. But the IMF does not give free money either. It simply gives financial reliefs. In the case of Zambia, they will do what they did to Greece. The IMF will give Zambia cash to pay back the Eurobonds so that Zambia does not default and so that their people in Europe do not lose out if Zambia fails to pay. But here is the main catch: the money the IMF will give Zambia to pay the Eurobond is not free, it is also a loan. So it will just be transferring the debt from commercial banks in Europe to the IMF. Instead of owing those banks that gave Zambia the loan, Zambia will now owe the same amount to the IMF, but, on top of that, the IMF will make Zambia change its economic policies as a condition. The IMF will tell Zambia to reduce the size of the civil service (fire some civil servants), it will tell the government to remove subsidies on agriculture, oil and tell Zambia to increase the cost of electricity. It will tell Zambia to implement serious austerity measures that will hurt everybody in Zambia except the rich and people like Edgar Lungu who live on tax payers’ money.

On the Saudi Arabia oil ‘deal’, the biggest beneficiary here actually is Saudi Arabia because first they have now a market to sale their oil and secondly they will earn interest for the next five years. But will the oil in Zambia be real cheap? The Watchdog doubts that very much.  We have heard these deals before from the same people. It is possible Lungu and his cronies will do some gymnastics and bring down the cost of oil just before elections just to triple it after elections if they win.

And by the way what happened to the much publicized cheap oil from Angola? Lies upon lies.

On January 4, 2012, the country was told that Zambia would start importing refined petroleum products from neighbouring Angola to lower the cost of fuel.

Then Energy permanent secretary George Zulu has told Reuters that oil-rich Angola was willing to supply Zambia with petroleum, which the country has been importing from the Middle East.

Zulu even said  a technical team led by the minister of energy would travel to Angola within a  week to discuss the details of importing finished petroleum products.

It was just another money wasting trip and venture full of hot air but financial benefits to PF officials.

One of the first countries Edgar visited when he was made president of Zambia was Angola, that was in February 2015.

On July 24, 2015, Lungu told the world that the  discovery of oil in Uganda is an opportunity for Zambia to explore ways of getting cheaper crude oil.

Speaking to journalists at Entebbe airport in Uganda, Lungu  said he and Ugandan dictator  Yoweri Museveni agreed to get crude oil cheaply from Uganda through Dar-as-salaam where it can be pumped to Indeni in Ndola.

It is now close to a year since Lungu said that. But has anything happened? No. He is now telling us he will get cheap oil from Saudi Arabia.

By the way, this Saudi Fund for Development is not a new thing. It was created in 1975 to offer assistance to poor Muslim countries. Zambia will be the first Christian country to receive ‘help’ from this fund.

 

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