Opinion: First Step To Solving Zambia’s Quagmire Of Financial Indebtedness

Blessings Kafwanka
(Business & Financial Analyst)

Acceptance is the starting point to finding a solution to any problem you may encounter in life. If you refuse to accept that a problem exists, it becomes virtually impossible to find a solution. The next step is generating or identifying possible solutions. More often than not, there’s always someone who has gone through the challenges you are going through right now. They say “a problem shared is a problem half solved” You don’t have to reinvent the wheel. Learning from the experiences of others will save you the trouble of spending time, energy and resources before you can figure out how to get out of that predicament. After that, you need to take decisive action to address that problem and bear the pain (side effects) that might arise.

That said, it takes a lot of courage for political leaders to accept the consequences of their actions. In the last 6 years, Zambia’s debt has ‘ballooned’ by well over 1,000% from about US$500 million in 2011 to US$12.5 billion in 2017 representing 47% of GDP. The worst in the history of our Zambia. Additionally, there’s no clear strategy of how this debt will be dismantled, especially the Eurobonds that will fall due starting from 2022 onwards. It’s great that Hon. Felix Mutati has finally accepted that Zambia’s debt risk has moved from moderate to high. But does this government have the tenacity to take decisive action to correct this position? There are a lot of lessons that can be taken from our history.

Not so long ago, late president Levy Patrick Mwanawasa’s government was faced with a quagmire of financial indebtedness similar to the one we are experiencing now. The intensity of the problem may differ, but surely, we can learn something from the way he engaged the International Monetary Fund (IMF) and endured side effects of the conditions given such as wage freeze, employment freeze, zero tolerance to corruption, prosecuting erring officers in public institutions, both past & incumbent office bearers regardless of political affiliation. Late president Patrick Mwanawasa was uncompromising in his fight against corruption to an extent of allowing the prosecution of the man that played a major role in his ascendance to political power.

During his tenure, we witnessed several corrupt leaders that were prosecuted and convicted without fear or favor. Today, our leaders have chosen to embrace and work with the very leaders they accused of being corrupt and mismanaging the country’s resources when they were in the opposition.
The international Monetary Fund (IMF) only makes loans if deflationary policies are followed. From the inception of the current talks between the IMF and the Zambian government, a number of deflationary policies were proposed by the IMF which include:

• Ban on unnecessary travel. This should be restricted to essential travel only
• Reduction in government expenditure
• Plans to start a new national airline should be will be differed
• New infrastructure projects should be halted. The old projects may continue
• Review the subsidies on agriculture and electricity tariffs – gradually shift to higher and cost reflective tariffs

If receiving the US$1.3 billion concessionary loan from the IMF depends on government’s adherence to the above pre-conditions, what are the chances that the loan will be granted? How have we fared in terms of restricting unnecessary travel, reduction in government expenditure and halting new infrastructure projects? How have we fared in terms of promoting fiscal discipline in public institutions and genuinely fighting corruption? Today, the prospect of clinching a deal with the IMF looks bleak due to the high and unsustainable debt position were are in.

Hon. Felix Mutati is right to accept that Zambia’s debt risk is high. But, in as much as acceptance could be the starting point to getting out of this quandary, decisive action must be taken.

This might involve political leaders making tough decisions that might not resonate well with the electorate in the short term. But in the long-term, the benefits will certainly be overwhelming. ‘Long-term perspective’ is what differentiates good leaders from bad ones.

“Politicians think of the next election, leaders think of the next generation”.