Maravi

Magande warns govt against reckless borrowing

Magande warns govt against reckless borrowing
By Fridah Zinyama
Tue 16 Mar. 2010, 04:00 CAT

NG’ANDU Magande has cautioned the government against reckless borrowing because it might lead the country into the debt trap again. And former University of Zambia development studies lecturer Dr Fred Mutesa has said it is very easy for a country like Zambia to fall into another debt trap.

These comments follow minister of commerce Felix Mutati’s revelation last week that Zambia had managed to secure a concessional loan of US $1 billion from the government of China for investment in development projects in hydro power, housing, road infrastructure and other sectors.

Mutati said Zambia was privileged to be among the first countries to seek the funds, saying as a result, the nation was able to access US $1 billion, which other countries might not be able to get.

But Magande, who is former finance minister and Chilanga MMD member of parliament, said it was important for the government to know its source of income even as it went ahead and borrowed such a significant amount of money from China.

“We do not get development contracting debt that we will not be able to pay back,” he said. “Before we contract such debts, we should first remember the US $7.2 billion debt that Zambia owed which was cancelled by the international community.”

Magande said the government leaders at that time were not able to sleep over that debt because they could not recruit teachers, build schools and clinics and other infrastructure, which the country needed.

“Now that we have removed that debt, caution should be exercised on how much debt government contracts,” he said. “Now people are praising themselves over the economic success that the country has attained forgetting what the country had to go through before it could attain such achievements.”

Magande wondered whether the country had any savings that could be used to repay such huge amounts of money, which were being obtained from China.

“Before we go again to get any more debt, let’s not forget our past because it can easily catch up with us,” he said. “10 years from now we should be able to pay back that loan or we will find ourselves indebted again.”

Magande said he was disappointed that people had so easily forgotten the US $7.2 billion the country owed.

“Unless some people were not in government at that time, then they are not aware of what government went through to get that debt forgiven,” he said.

Magande said it was not reasonable for the government to borrow for infrastructure such as roads when the country had no toll gates to charge road users.

“Money would have been obtained at a price to work on roads which government will not be able to get any income from,” he said.

Magande said the Chinese had been all-weather friends of Zambia for a long time now, adding that they should be in a position to help the country develop.

“China’s economy grew without it getting in debt,” he said. “Can they help us see what we are doing wrong as a country.”

Magande said China had reserves of about US $3 trillion whilst Zambia only had US $1.8 billion, which was insufficient to pay back the debt that the country had contracted.

“It is important for us as a country to assess individual projects and how much they are going to cost us before we can look for finances to undertake such projects,” he said.

“Reckless borrowing is not needed for a country such as Zambia because it will be our children who will suffer when paying back such huge sums of money.”

Magande said that was why late president Levy Mwanawasa’s regime formulated development programmes like the 2030 vision and the development plans so that it would easily map up its success and how it would achieve its set objectives.

“Why can’t we now plan for every kwacha that we are getting as a nation,” he asked. “This is why we should ensure that we get as much as we can from our natural resources like copper.”

Magande said it was not right for foreigners to gain from the country’s resources while the citizens were deprived of the benefits.

And Dr Mutesa said it was easy for Zambia to fall into the debt trap again unless measures were put in place to prevent this from happening.

“This is why stakeholders have been calling for the enactment of the debt contraction bill which should act as a safeguard against reckless borrowing,” he said.

“Stakeholders have for a long time been calling for a debt contraction process which is independent of the Executive and located within the Parliament buildings.”

Dr Mutesa said it was unfortunate that such an important process had taken so long to materialise, as it would have taken care of debt contraction in the country.

Labels: DEBT, FELIX MUTATI, FRED MUTESA, MAGANDE

posted by MrK @ 11:59 AM