MOVEMENT for Democratic Change president Felix Mutati says lenders should not be blamed but leaders need to control their appetite as borrowers.
During a Diamond TV programme: ‘Zambia’s debt: Who has the answers?’ on Thursday, Mutati said Zambia’s debt associated with the Eurobond has two components, one which deals with deferment of interest payment and the second and most difficult and complicated part being the restructuring of the repayment mode of either pushing it backwards or breaking it up.
He said his initiative of Zambia Plus which he introduced as minister of finance started to have problems when the PF government did not give civil servants the attention they deserved.
“So the phase we are already in (deferment) have challenges to deal with. What that has done is that Zambia is slowly being shut out of the credit and capital markets overseas, what this is doing in addition is that, portfolio investors who bring in foreign exchange and invest in treasury bills and bonds in Zambia are sitting on the fence,” he said. “The third aspect is obviously our image is dented. So the issue now becomes how then do you proceed to deal with that? It is very clear that at the core is the challenge of information with regards disclosure which we need to deal with.”
Mutati said Zambia had become more vulnerable to deal with the debt shock.
“We have no ammunition to deal with any shocks, so we are in a situation where whatever we do to the bondholders, the others are saying ‘do unto us, what you do unto them’. But we don’t have the capacity to address the two at the same time. But what is the way forward?” he asked. “Begin to take critical decisions and for me I would say we need structural reforms around requirement of farming inputs, fertiliser, around the procurement of oil and you notice that because of the these two factors in October and November the exchange rate was affected.”
Mutati said the lenders should not be blamed but that leaders need to control their appetite as borrowers.
“To my knowledge and information, we have the Chinese debt standing somewhere between US $3.4 to 3.6 billion. We need to repair our image on the capital market. We need a certificate of fitness from the IMF (International Monetary Fund),” said Mutati.
Meanwhile, MMD president Nevers Mumba said Zambia’s economy is overheating.
Mumba said PF leaders lack leadership of character, morality and integrity which late president Levy Mwanawasa had.
“I have never thought that China is the problem. I have always thought that we are the problem because we are not able to morally make a decision that is in the interest of the nation. We are dealing with a debt which is unsustainable. When we (MMD) left and handed over power to the PF in 2011, we were only dealing with 15 per cent of the GDP (gross domestic product) – at that time our GDP was US $23.5 billion. But we were only at 15 per cent in terms of debt level. Today as I speak, the recent numbers I looked at we are at 59 to 60 per cent of our GDP dealing with debt, which means we are in a crisis, the economy is over heated,” he said. “So what we need to do as a country is to immediately stabilise the economic fundamentals upon which the economy can recover.”
He said China in his view was not antagonistic but just an aggressive investor.
Mumba said there was need to place a premium on leadership which has
morals, character and integrity.
“China is an aggressive investor and we do not have enough security to handle China, because it gets into your country and makes you borrow even beyond your capacity to repay,” he said.
Mumba said despite not being an economist, Mwanawasa was a leader of deep morals which enabled him make decisions that offered solutions.
“We (MMD) are going to accept the mess we are in which has become difficult for our friends in PF to do…Secondly we are going to uplift the placing of premium on the quality of leadership that we put in office. Thirdly, we are going to work on clearing the name of Zambia so that once again it is an adorable name that people would like to do business with and fourthly we are going to create a new economic path that does not depend on other people’s tax payers to look after our own people,” he said. “The point is that Zambia lacks character and integrity that can do the right thing. What did Levy (Mwanawasa) do? He said ‘let’s look at ourselves first, limit expenditure, make sure that we start spending within our means so that the international community, the multilateral lenders can see that we are a serious government that believes in fiscal discipline’. We realised that we could not ask our friends to work with us until we deal with issues of corruption.”
Mumba said if Zambia wants to get out of the Eurobond and debt fix there was need to be honest with each other and accept that “we are
in a mess”.
“The problem with the Patriotic Front is that they are unwilling to accept that we in a mess. What is missing in Zambia is the fortitude of leadership. Before we contract any debt from any country we must have the capacity to repay, just like at household level,” said Mumba.