The careless contraction of foreign debt by the Patriotic Front (PF) government is a danger to the nation, former Solwezi Central Member of Parliament Lucky Mulusa has said.
Commenting on Bank of Zambia governor Michael Gondwe’s explanation about the contraction of loans, Mr Mulusa said it was misleading and lacked merit for simple understanding.
He said that Dr. Gondwe’s position on the loans the PF was contracting was not only shocking but a source of great concern.
“This was shocking especially coming from someone who should know better that this is not the case. Let me take time to explain to Dr. Gondwe the sources of our concerns. Debt must be contracted within the parameters of a broader developmental strategy in which some projects can only be achieved through debt contraction. The PF currently does not have a developmental strategy we know of. A manifesto is not a developmental strategy,” Mr. Mulusa said. He reminded Dr. Gondwe that so far government had issued two bonds one after the other in under two years, “ meaning that together with the FQM corporate bond issued for purposes of furthering Kansanshi operations, the years 2019, 2022, and 2014 will be crucial redemption years in which the economy will see capital outflows of $350 million for the corporate bond (FQM), $750 million, and $1 billion for the sovereign bonds respectively.”“This is in an economy which would not have received any contributions to its reproductive capacity from the two sovereign bonds. On 4th October, First Quantum Minerals (FQM) successfully priced its debut 144a/RegS USD350mn senior unsecured notes due October 2019 at a yield of 7.250%. The bond is callable after the first 3 years. The transaction marked the first non-sovereign bond out of Zambia and followed Zambia’s debut sovereign bond in September in the same year (2012),” explained Mr. Mulusa.
He also noted that there were massive corruption and pure inefficiencies especially in the transport (road and rail) construction sector, adding that borrowing funds which were corruptly applied led Greece to the total collapse of the economy.Mr. Mulusa urged government to run away from the destiny of debt trap, which among other things the PF leadership should come up with a developmental strategic plan.