The debt swap lie exposed further

The debt swap lie exposed further

This is just the truth. When banks start suing civil servants for failing to pay back loans, government won’t be involved because it has never been part of the contract between the borrower (you civil servant) and lender (the bank.

Read this carefully👇


Afternoon Watchdog Team,
As a banker, I would like to add my voice to the freezing of deductions for 3 months by government in view of the ” alleged debt swap” for Civil Servants.
Firstly, I would like to remind indebted civil servants that the loan service agreement was between them(CIVIL SERVANTS) and the Banks. The banks, currently are therefore not a party to this debt swap agreement.
Secondly, the government owes Bayport FINANCIAL services in excess of K400 Million. This implies, a lending institution cannot afford to suspend loan deductions for 3 months, bearing in mind the credit rating for government. In short , the government cannot afford to buy debt( loans) from financial lenders in excess of K5 Billion when they can’t settle Bayport their unremitted loan deduction dues.

So what will banks do when the civil servants salaries are credited next week? The Banks will hold the funds upon credit, they will only release the funds once Government have remitted the loan repayments through the PMEC system. That said, I advise all civil servants to be cautious with Government. Please do not borrow on the premise of the DEBT SWAP, you will be DEBT TRAPPED in a VOTE SWAP.
N.B: On Monday, consult your banker the implication of a debt SWAP, ask in details as to whether the deductions will really be frozen for 3 months, or else it will end in tears



*1. As Patriots for Economic Progress (PeP) it is our considered view that the decision by Government to invoke the so-called “debt swap” on civil servants will bring about more problems than benefits to both the civil servants themselves and the economy at large. Firstly, the total amount of money which civil servants owe various bank and non-bank financial institutions across the economy is in excess of K6 billion whereas the net assets of the Public Service Micro Finance Company Limited (PSMFC) are less than K500 million, meaning that PSMFC has no financial capacity to buy off the debt that civil servants have with various bank and non-bank financial institutions in the economy.*

*2. Secondly, it must be noted that despite PSMFC being established in 2013, the majority of civil servants have shunned it and do not borrow from it but prefer to borrow from other bank and non-bank financial institutions because they find the terms and conditions offered by other financial institutions, including lending rates, to be more favorable than those offered by PSMFC. It must also be noted that as a micro finance company, the average lending rates of PSMFC are far higher than those of commercial banks. According to a publication by the Bank of Zambia (BOZ) on “Charges, Fees and Commissions and a Demonstration of the Cost of Borrowing K1,000 for One Year for Micro Finance Institutions in Zambia as at 31st March 2020”, PSMFC had one of the highest effective annual lending rates at 110%. Hence, by compelling civil servants to move their loans from commercial banks where lending rates are as low as 30%, and take them to PSMFC, Government is making civil servants worse off rather than better off.*

*3. Thirdly, most loan agreements have a standard penalty clause for early settlement, which are often disguised as an administration fee. Therefore, when Government pays off these loans which civil servants have with various bank and non-bank financial institutions, the question is; who will pay the penalty fees for early settlement? If it is Government, then this amounts to a shear waste of taxpayers’ money. If it is the individual civil servant, then this amounts to an unnecessary financial burden which could have been avoided, and it will end up leaving civil servants worse off rather than better off.*

4. Fourthly, Government has proposed a 3 months loan-deduction holiday for all civil servants by PMEC, as this so-called debt swap is being facilitated, effective from this July month end. However, this proposed loan-deduction holiday is more of a curse than a blessing on civil servants, especially those who owe bank and non-bank financial institutions other than PSMFC. This is because non-remittance of loan deductions by Government on behalf of civil servants will result in the credit-rating of individual civil servants being significantly downgraded by the Credit Reference Bureau, which will make it more difficult if at all, for these affected civil servants to access loans in future. Or if they do, such future loans are likely to be at higher borrowing rates due to the downgraded credit rating. Therefore, by implementing a 3 months loan re-payment holiday effective from July month end, Government is making civil servants to be worse off and not better off.

5. As Patriots for Economic Progress, it is our considered view that the proposed debt-swap by Government is not only financially unsustainable, but will actually make civil servants to be worse off in the longer term as they will be compelled to pay higher borrowing rates at PSMFC, will have to pay penalty fees for early settlement from their existing financial institutions and also risk having their individual credit rating downgraded due to non-remittance of loan deductions by Government due to the declared 3 months loan deduction holiday. Therefore, there is no question that civil servants will be financially worse off rather than better off as a result of this proposed debt swap.

6. As Patriots for Economic Progress, it is also our considered view that the decision by Government to embark on this so-called debt swap program actually amounts to partial nationalization of the financial services sector in particular and killing of the private sector in general. It must be noted that the perils of nationalizing an economy are well documented and still very vivid from the UNIP era. The liberalized free market economy that President Chiluba introduced in 1991 was the greatest blessing that this country has ever received. As President Chiluba succinctly put it; “it is not the business of Government to be in business”. The role of Government is to create a conducive environment for private sector enterprises to thrive and prosper. Given the fact that Government is by far the largest employer and civil servants constitute the largest business portfolio for individual clients for most bank and non-bank financial institutions, the total effect of Government’s proposed so-called debt swap is to partially nationalize the financial services sector. The adverse impact on private institutions in the financial services sector will be significant, and will be exhibited by loss of jobs and possible shutdowns.

7. As Patriots for Economic Progress, we feel duty bound to advise Government to rescind its proposed so-called debt swap immediately, as it is not only retrogressive to the economy but will make civil servants to be worse off rather than better off. In fact, given the true substance of this proposed transaction, the phrase of “debt-swap” that Government has attached to it is misleading and does not represent the true nature of the proposed transaction. The most accurate phrase to describe this proposed transaction is “partial nationalization of the financial services sector”. And in our considered view, of all the policy blunders that the PF and its Government have made ever since ascending to power in 2011, this will turn out to be the most grave of them all.

Thank You and May God Bless the Good Citizens of the Republic of Zambia and Our Ailing Nation.



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  • comment-avatar

    this is a scam by PF Fools.

  • comment-avatar
    Muwerewere Musemakweri 2 weeks ago

    I met a group friends who are civil servants and the poor souls were excited at the PF govt idea of being given a 3 months holiday on their debt obligations monthly repayments. After I explained how the banks operate and the implications on their loan accounts they fellows nearly fainted. In those loan agreements there were no clauses for debt swap or holidays. The once Mighty PF govt want to show the civil servants that they care for them in exchange for their votes but after September they will feel the harsh effects such stealth PF plans and will cry more louder than ever. The once Mighty has behaved like a a careless parents who exposes his children to danger and pretends to provide short comfort instead of long lasting solutions. Its only HH and UPND Alliance who can best serve their interest because of friends in once Mighty PF abandoned the Boat longtime ago. They very will that it is sinking with the crew just waiting to ditch it completely. What is there wealth left to salvage from the BOAT?

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    Buck Teeth Lungu 3 weeks ago

    Those who have ears should listen. I pity the PFoools who will fall in this PF trap.

  • comment-avatar
    Observer 3 weeks ago

    Zambia is slowly but surely turning into another Zimbabwe.

  • comment-avatar

    the last fake kicks of a dying horse. ecl has commanded kcm to pay its retirees within a month when himself has failed his govt retirees who have been waiting even for over ten years now. The debt cancellations for individual borrowers would be justified if the president sent sent a uniform amount of cash to everyone’s account rgardless whether one has a recorded credit or not. this is so because some borrowed and bought houses . what about those who never borrowed , what benefit are they going to get from this scheme if not fake?

  • comment-avatar

    what about the retirees