Maravi

Let's avoid unnecessary debts

Let's avoid unnecessary debts
By Editor
Saturday October 13, 2007 [04:00]

There is a saying that those who refuse to study history are destined to repeat it. And experience has shown that when history is repeated where it could have easily been avoided, the effects are even more devastating than during the first experience. Truly, it is a great pity that Zambia, having just come out of a suffocating debt of about US$7 billion, is again back on the borrowing path, a dangerous path to tread for a country that is still battling with a hangover of an excruciating debt.

It is a pity that after reducing our external debt to US$502 million only in July 2006, the amount had dramatically risen to US$1.5 billion by December 2006.

We do understand that borrowing cannot be completely done away with, especially for major capital projects, but we also know that there should be prudence and responsibility on the part of those who borrow on behalf of the nation.

And this is why Dr Kenneth Kaunda and others have today decided to go without food in order to demonstrate to those who are in the habit of imposing debt on our heads that they have been very unkind in their motives.

We agree with KK that most of the debt that we have found ourselves in has not been given to us on favourable terms because most of the time they are aimed at enslaving us. Let us remember how we struggled as a nation to develop because we had to channel most of our earnings towards repayment of debts which were basically imposed on us by ill-motivated forces.

By this time, we should know very well the effects of debt on our countries. All over the world, we have seen how debt has crippled many developing nations.

Today, millions of people face poorer and poorer living standards primarily due to the fact that most of the resources have to be diverted towards debt repayment.

Although we may blame the governments of poor countries that borrowed carelessly, we also think that the rich nations and other multilateral groups such as the World Bank and the International Monetary Fund (IMF) share a huge amount of the blame for lending irresponsibly.

It is understandable for anyone to wonder why we should be criticising debt when a nation like ours is still poor and needs to employ numerous measures of mobilising resources for its development. We have already said that it is not possible to completely do away with debts.

What we are against is accrual of odious debts, borrowing enormously to the point of strangulating our economy and leaving the majority of the people in extreme poverty as resources are channeled to rich nations which lend, basically for poor borrowing nations to subsidise the rich.

As we have shown already, our major worry now is that debt accrual is not ending. We are still borrowing and it would appear that we have not yet learnt any lessons from borrowing carelessly.

According to informed experts, total debt continues to rise at the global level, despite ever-increasing payments while aid is dwindling. We are told that we in the developing world are spending US$13 on debt repayment for every US$1 we receive in grants.

For the poorest countries, US$550 billion has been paid in both principal and interest over the last three decades, on US$540 billion of loans, and yet there is still a US$523 billion dollar debt burden.

This is why we thought that although he probably might not have been the best person to have said it, since he represents a regional grouping whose members have also extended odious debts to poor nations, European Union head of delegation in Zambia Dr Derek Fee was spot on when he warned that it would be a scandal for Zambia to get itself back into debt.

As he correctly observed, Zambia had benefited from debt write-offs under the Highly Indebted Poor Countries (HIPC) Initiative and it would be a scandal for the country to start contracting loans again.

This advice is correct because there would be no benefit from relieving ourselves of the debt overhangs only to quickly take on other loans where we are required to pay back through our nose.

We thought this advice was timely and correct. But what did we get from finance minister Ng'andu Magande? He started addressing a non-issue, talking about the fact that Dr Fee had no right to decide which nations Zambia should partner with.

Yes, Dr Fee might have been subjective or self-interested in his reference to the fact that African countries were mortgaging their countries through the loans they were taking from China. However, the important point from Dr Fee was that, and as he put it himself: "It will be an absolute scandal if Zambia started getting itself back into the loan track of taking loans and having to pay back.

" Rather than jumping to conclusions about how Zambia should be left alone to decide where to get loans from, Magande would have helped a lot if he cared, even a little, to answer the question about Zambia's descent into new loans when it is just emerging from a very huge debt overhang. Of course Magande might have reacted that violently because he had just announced that Zambia was about to contract a loan from China totaling US$39 million for purchasing equipment for maintaining feeder roads.

Yes, Magande can easily justify this kind of debt because he knows that it is not his generation which is likely to repay it. We do not want to get back to a situation where we will be told that all these debts were accrued some thirty or forty years ago by the political leaders then.

This is what we were being told about the famous US$7 billion, that it was a result of careless borrowing as far back as the 1970s and we were still paying it back until last year when we qualified for the so-called HIPC debt write-off.

So we share the concerns of people like Dr Kaunda that the time for imposing debts on our heads is gone and our political leaders must begin to accept the fact that they can no longer borrow carelessly. There is no need to tie future generations to poverty inflicting debts. We have had enough painful lessons about some of these debts from rich nations.

The time for careless borrowing is gone and it is important that the loan contraction reforms in Zambia be expedited so that current politicians are not allowed to keep committing and tying future generations to debts which are not necessary and can be avoided.

Labels: DEBT, EDITORIAL

posted by MrK @ 4:10 AM