Zambia’s debt swells to US$2b

By Sanday Chongo-The uncontrolled upswing in Zambia’s foreign debt from US$500 million – five years ago – to about US$ 2 billion this year has sent fresh warning fears that the country might find itself in yet another debt burden.
In mid 2005, Zambia’s staggering US$7.1 billion debt was written-off after the country managed to toe the conditions set by the Bretton Woods institutions under the Highly Indebted Poor Countries Initiative .

The debt burden, that dated as far back as pre-independence era, battered Zambia’s socio-economic system to the extent that the southern Africa state could no longer afford to provide key basic services to its citizens.

Years of sacrifice, wage freezing, tight fiscal policies, sound corporate governance and strict adherence to IMF-World Bank backed conditions helped Zambia overcome its indebtedness by qualifying for debt forgiveness under HIPC initiative. Zambia only managed to reach the HIPC completion point after two failed attempts.

Since the country’s debt forgiveness in June 2005, there has been renewed concerns that the swell-up in Zambia’s foreign debt from US$500 million to US$2 billion might lead Zambia into yet another debt trap.

Anti debt campaigners such as Jesuit Centre for Theological Reflection and Jubilee Campaign are worried that lack of a debt contraction and management system in place, the country is likely to find itself in a similar position where it would not be able to liquidate its indebtedness.

Contentions by anti debt campaigners are that, in its current state, the Zambian legal system entitled the Minister of Finance and National Planning to procure fresh loans and grants without consultation or approval from Parliament. They further contend that, much of recent debt being accrued was being channelled towards consumption rather than capital investment in key sectors of the economy.

Within a string of three consecutive years, the Auditor General’s Report has unearthed serious scandals of gross financial mismanagement, mostly by public officers. Efforts to arrest and prosecute thieving public officers involved in these scandals have been lukewarm – something the Office of the Auditor General argued undermined efforts to formulate a water-tight public resources management system.

But in collaboration with civic organisations such as JCTR and Transparency International Zambia, the Zambian Parliament through the Charles Milupi led Public Accounts Committee have joined calls for the legislature to get involved in the procurement of fresh loans or grants . These loans might either be concessional or non-concessional – they might have conditions or no conditions attached to them. There are currently combined efforts that are lobbying government to come up with a Debt Management Strategy that would involve a broad range of stakeholders before a fresh loan could be procured.

Zambia’s Paliamentary Accounts Committee Chairperson and Independent Legislator for Luena in Western Zambia, Charles Milupi said, “there is an urgent need to strengthen parliamentary oversight when it comes to debt contraction. Parliament should be mandated to play a role in debt contraction. It is very sad that Zambians have come to tolerate the misuse of public resources and corruption”.

Milupi, who doubles as Vice Chairperson of the Public Finance Committee of the on-going National Constitution Conference said involving Parliament in the procurement of loans would ensure transparency and accountability in the utilisation, management and disposition of public resources.

Programme Officer for Debt and Public Resource Monitoring at Jesuit Centre for Theological Reflection (JCTR), Privilege Haang’andu said, “as the issue of responsible lending and borrowing becomes topical on the international scene, especially in the context of the current financial crisis, it is timely that countries, especially those with memorable negative effects of indebtedness, reflect seriously on what contributions they can make towards a system of responsible lending and borrowing”.

Haang’andu remarked that it was a known fact that the current financial crisis was born from negligence in the lending and borrowing practices. He said coming from a gloomy background of indebtedness, it was timely Zambians re-examined the steps that the country had taken to ensure a future that was unburdened by debt.

He noted that Zambia was at an exciting stage in charting a future free from another debt trap.

“After so much concern and talk about a new debt, we have witnessed serious recommendations from the Public Finance Committee of the National Constitutional Conference about water-tightening the Parliamentary Oversight. That is a significant step towards realising a Zambia free from a debt trap again. Parliamentary Oversight will entail that Parliament will by legal mandate, scrutinise, debate, approve and limit the loans the Ministry of Finance and National Planning will raise for the nation, taking into account the debt sustainability and needs of the country in every given financial year”, said Haang’andu.

Recommendations from the Sherry Thole chaired Public Finance Committee of the Nantional Constitution Conference on Parliamentary Oversight fell-out after they failed to gunner majority backing from both members of the committee and the plenary of the NCC. The recommendations would now have to be taken to the public through a referendum after which it would be known whether or not the revised Constitution will subject the Ministry of Finance to Parliamentary Oversight before accruing fresh loans from international donor agencies.

JCTR’s Trade and Aid Coordinator Tina Moyo expressed regret that the NCC rejected an opportunity to come up with a Constitution that allowed Parliamentary Oversight whenever the country was acquiring loans and debts.

Moyo said lack of Parliamentary Oversight in the procurement of debt brews a lot of uncertainties and cited the 2006 Vulture Fund Scam in which Zambia was sued for a debt it acquired from Romania decades ago.

“I only hope that when we come to a referendum. The issue of Parliamentary Oversight will be considered by the Zambian people. The power lies within us as Zambians to ensure that we are not caught up in debt again ,” she said.

Zambia, was among several highly indebted countries whose debt was forgiven by international financiers such as the World Bank and IMF. It was thought that the proceeds from the debt write off would be used to improve service delivery in social sectors like health and education. However, the situation was not to be . It was speculated that the proceeds from HIPC savings did not trickle down to the majority poor but instead authorities continued to accrue more debt to the extent that the figure has doubled from a mere US$ 500 million to US$ 2 billion within the last four years.
African News

Share this post