WE SHALL END UP IN A SITUATION WHERE ZAMBIA WILL BE BORROWING TO SETTLE DEBT…if Kwacha continues weakening, observes Financial Analyst
By Agness Changala
Financial Analyst Maambo Hamaundu has predicated the continued depreciation of the kwacha in view of the bond holders refusal to suspend interest for a period of six months.
And Hamaundu has pleaded with the government to defer some capital expenditure projects which have been planned for the coming year, because the government doesn’t have money.
Speaking with Daily Revelation, Hamaundu said the Central Bank had indicated that the biggest money pressure was coming from debt serving activities.
He said the above coupled with the bondholders refusal to grant the country suspension of interests for a period of six months, the pressure would continue and have a negative feedback on the rate of exchange.
“Because the production cost remains subdued. The mining sector is faced with its own challenges, and that is killing in terms of what we are receiving from the mining sector. The kwacha might continue to weaken and unfortunately we expect to be a bit constrained because generally many businesses are not performing well,” Hamaundu said.
He also said the significant amount of money that we would collected domestically would be swallowed up through debt serving, salaries and wages plus a bit of recurrent expenditure.
The financial analyst said if the kwacha continues to lose strength, the country might end up in a situation where it begins to borrow to settle a borrowing.
“Which is not really a good thing. I think it would be prudent that we realistically relook at the budget and break down some of the capital expenditure items which we have in the budget. When you look at infrastructure I think some of the items could be suspended. Because the reality is we do not have money. What we need to put money in activities that will enable us to generate a bit more money and meet our short term obligations, ” Hamaundu said.
He said after the economy stabilises, the country can begin to reconsider and replan the infrastructure department.
“I think it’s a plea I can make to the government through Ministry of Finance to actually see if we can not or to see to it that we defer some of the capital expenditure which have been planned for the coming year,” Hamaundu said. It becomes imperative even as we go out. I think one of the reasons the bond holders have given for not granting us relief is lack of confidence and confidence can begin if we manage to get to an International Monetary Fund (IMF) programme.
He wondered why the government was reluctant getting onto the IMF programme.
“I think the question must be answered as to why we are not getting onto the IMF programme.
What are the challenges that the government is facing that are making us fail as a country to get onto the IMF programme. All centered around the question of discipline, the question of committing to plan. I think we need to move into that direction,” he said.
Hamaundu said there was need to plan and see if the country can get onto an IMF plan so that it gains credibility.
He said going this direction would help the country from a donor perspective because donors would be a bit more comfortable to deal with the country and decisions such as one made by the bondholders would actually work out in the country’s favour.
“It is important that we work on getting into the IMF programme,” said Hamaundu. -Daily Revelation