Maravi

K1 trillion for govt idling in banks, reveals Magande

K1 trillion for govt idling in banks, reveals Magande
By Kingsley Kaswende
Monday February 12, 2007 [02:00]

ABOUT K1 trillion of the K9 trillion that was approved in 2006 remains unspent and is lying idle in local commercial banks, Finance minister Ngíandu Magande has disclosed. Magande said the government had too much money in commercial banks. He said the government had over the past years failed to meet its benchmarks for net domestic borrowing.

"In 2004 we found K500 billion lying idle in our account Control 99 and that was after we had withdrawn some money for government departments," he said. "We have asked the Bank of Zambia (BoZ) to co-operate and mirror the accounts of government departments. In 2005 there was K400 billion of government money in commercial banks. In 2006, out of the K9 trillion we budgeted, K1 trillion was unspent and remained in banks during the year." Magande was concerned that the government was borrowing its own money that was held in commercial banks. "My borrowing from the banks was 1.5 per cent of GDP so I was borrowing my own money. We asked the central bank to get all this money, the BoZ account. However, to our surprise, we had protests from commercial banks and some cooperating partners and we wondered why," he said.

Magande warned commercial banks that they would subsequently not have easy rides. He said he was not going to be kind to them. "Three years ago I told them (commercial banks) that they will not expect much from us. If they are not careful this year I will not get my money into their accounts until its use can be found," he warned. "There is no way government is going to be funded by borrowing its own money at high interest rates. In fact, by the end of February, or in the next two weeks before the budget is approved, I could have about K800 billion of the K1 trillion ready to be spent."

Magande was reacting to economic consultant John Kasanga, who expressed concern at an EAZ post-budget discussion forum that there was too much government money in commercial banks. Kasanga was referring to sticky interest rates on the financial market despite the drastic reduction in the rate of inflation. He said at the end of 2006 the interest rates had closed the year at an average of 21 per cent. "But productive sectors still face lending rates of about 29 per cent even if we have single digit inflation," he said. "If investment in economic growth is like that we will scatter our good intentions."

Kasanga told Magande that although he could not impose interest rates on the market, it was government deposits that were fuelling the problem. He sad the government had too much money in commercial banks. "This is why when you compare the banking sector with other sectors, it is the only sector that recorded quadrupled profits," Kasanga noted. Meanwhile, Magande has urged mobile phone service providers to team up and raise joint licence fees for the international gateway.

The international gateway would allow for mobile phone companies to cut their mobile tariffs by about 50 per cent, according to projections. He said contrary to beliefs by mobile phone companies that the government had refused to liberalise the international gateway, the government had liberalised it through a statutory instrument in 2002. "The problem is in the pricing of the licence. We are being told to reduce the licence fee," Magande said. The licence fee has been pegged at US$12 million. Magande said the government was being careful about reducing the licence fee. "We don't want to peg the licence fee at US$2000 only to realise they are making billions (of kwacha) in a few weeks and we have to start reviewing it," he said.

Labels: CORRUPTION, INTEREST RATES

posted by MrK @ 7:05 AM