Debt Sustainability

SOMETIMES we Zambians are our own worst enemies.

Whereas the rest of the world and indeed astute international community has faith in our economy as reflected in the oversubscription of the US$1.5 billion Eurobond, we are preoccupied with the form rather than the substance of the bond.

Instead of debating and counselling Government with regard to effective investment avenues, critics are concerned with the spectre of debt default as a result of an escalating trade deficit.

Explanations that our debt ratio is still within manageable ratios have failed to hit a resonant note either due to ignorance or perhaps in some cases, political obduracy.

The truth, as our Greek counterparts have noted, is that a depressed economy without substantive investment will never develop and grow.  It will rather stagnate, wilt and die.

An analogy has been drawn with an ailing patient who deserves an infusion and whose denial will ultimately lead to certain mortality.

In our case the spectre of debt default is looming large as the country continues to borrow to finance infrastructure for economic development.

Many Zambians including members of Parliament have expressed concern at the meteoric rise in Zambia’s total debt burden in the last three years which has risen virtually from zero to more than 8 billion dollars next year.

Most of the money has gone to roads, Zambia Railways, hospitals, schools and other social infrastructure, which according to most critics will not make sufficient returns to guarantee repayment of the loans.  Many Zambians would rather the country did not borrow.

Fortunately this is a sentiment that the Minister of Finance Mr. Alexander Chikwanda is familiar with as exemplified by his statement in Parliament yesterday in which he tabulated the current status.

Both sides, the critics and Mr. Chikwanda alike, are agreed that unless there is a very clear drastic paradigm shift there is a real and living danger that the debts being contracted will pose a serious economic challenge in years to come.

The biggest problem seems to be the volatility of the Kwacha, which is itself a factor of many variable components that are based on local and international economic performance.

The biggest factor, however, is domestic, in which we have the means and capacity to control.  Over the years Zambia has become totally import-oriented.  We import all manner of products including, as the minister noted, fruit juices from South Africa which this country can produce given the abundance of arable land and favourable weather.

Until and unless Zambia can export and earn foreign currency, the Kwacha will remain volatile and therefore the efforts at growing the economy will not succeed.

The danger of a trade deficit as the one faced by Greece is a possibility that will arise if we fail to service our debt obligation to the international community.

We entirely agree with the suggestion that economic stakeholders must urgently convene to chart a way forward with regard to creating a practical, sustained and viable export drive.

We have previous experience with Zega, which grew out of a successful initiative to promote non-traditional exports which included roses, coffee and other crops.

For a while this effort succeeded and Zambia earned considerable revenue from a well coordinated programme of nurture, husbandry,  marketing and export development.

At the heart of the exercise was a training programme that Zega with the assistance of the Natural Resources Development College developed.  Unfortunately this has collapsed and no effort has been made to resume and develop the programme.

It is important that as Zambia borrows some of the money must now be directed to this programme of developing non-traditional efforts.

These should include revamping our coffee industry which is dying a natural death. 

The absence of a national airline is not an excuse or failure to develop non-traditional exports.  The current airline mix should still make it possible for our exports to reach destinations in good time.

What is required is effort and determination.


Categorized | Editorial

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