Maravi

(YAHOO, BLOOMBERG) Zambia Default Sets Tough Tone for Talks With Bondholders

“A default could make an orderly and timely restructuring more challenging,” said Samir Gadio, head of Africa strategy at Standard Chartered Bank Plc in London. “A prolonged default may see some investors unwind non-performing bonds,” battering down prices that are already below half of face value, he said.

Holders of Zambia’s $3 billion of Eurobonds rejected a request to suspend interest payments for six months, and the grace period for an overdue $42.5 million coupon lapsed Friday, triggering a default.

That gives holders of all three securities the right to demand immediate repayment. While it’s unlikely they’ll take that route, Zambia could find itself locked out of international capital markets for years while it struggles to reduce its debt load and address fiscal challenges. General elections scheduled for August add another layer of complication.

“I would expect debt-restructuring talks for the Eurobonds to be very difficult and I would expect them to be protracted,” said Phillip Blackwood, adviser to Sydbank, which manages and advises portfolios with Zambia Eurobonds.

The default will make Zambia’s “financial conditions even tighter for a place where financial conditions have already been tight for quite a while,” said Gustavo Medeiros, deputy head of research at Ashmore Group, which holds Zambia’s dollar bonds. Local currency notes already have yields as high as 33%, and the kwacha has lost nearly half of its value against the dollar this year.

Equal Treatment

Zambia couched its request for an interest freeze as part of the Group of 20’s so-called Debt Servicing Standstill Initiative, an agreement between rich nations to suspend interest payments owed to them by poor countries. The government said it was asking all its foreign creditors, including private lenders, for the same relief.

China Development Bank last month agreed to defer interest payments. While that covered a small portion of the debt, it created a precedent that made it difficult to pay bondholders.

“The government is strongly committed to pursue a constructive and very transparent dialog with all its creditors,” Finance Minister Bwalya Ng’andu said Friday, adding that the state had no choice but to build arrears.

No Example

Bondholders, however, were concerned any relief they granted would be used to service debts to Chinese lenders, which account for more than a quarter of Zambia’s external liabilities. They also want more transparency and a credible economic recovery plan, preferably with the International Monetary Fund’s endorsement.

Other governments shouldn’t see Zambia as an example for how to approach debt restructuring, said Simon Quijano-Evans, an economist at Gemcorp Capital in London.

“Zambia can’t be used as a comparison to other countries, simply because it failed to approach the IMF over several years and failed to be transparent,” he said. “Other countries like Angola and Ghana did exactly the opposite and are thus in a much better position than Zambia.”

While the coronavirus pandemic added to Zambia’s woes, its debt problems started years earlier. The government borrowed heavily since 2012, ignoring warnings from the IMF of growing debt distress risks.

Some Eurobond investors, including Blackwood, argue that Zambia’s troubles only emerged in the years after it tapped international markets, and turned to China for funds. The nation sold its first dollar bond in 2012 and the last one in 2015.

“From Eurobond holders’ side, this is not about an unwillingness or otherwise to forgive debt,” he said. “It is clear to Eurobond holders that the debt problems escalated when the bilateral loans accelerated, after the Eurobonds were issued. The nature of those deals quickly caused problems for the country.”

(Updates with investor comment in the seventh paragraph.)

Labels: DEBT, EUROBONDS, IMF, World Bank

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posted by MrK @ 2:47 AM 1 Comments

(LUSAKA TIMES) Zambia heads to showdown with Bondholders as vote on payment holiday request is on today October 20, 2020

Zambia is not making it any easier for bondholders to give it breathing space.

Days after the government said it didn’t have the cash, it skipped a $42.5 million coupon payment — only for Finance Minister Bwalya Ng’andu to tell lawmakers the Treasury could have paid if it wanted to.

That may leave investors doubting the government’s will to tackle its debt problems in the run-up to elections in August.

“Zambia may very well be the most prominent battleground that this tension between creditors plays out,” said Irmgard Erasmus, an economist at Paarl, South Africa-based NKC Africa Economics. 

“Eurobond holders, in particular, are certain to use all the weapons in their arsenal to limit moral hazard to the rest of sub-Saharan Africa.”

Zambia skipped the coupon on the recommendation of its advisers, according to Dr Ng’andu.

“They were of the strong view and opinion that if we pay we were going to create a very hostile environment within which to negotiate with other creditors,” he told lawmakers Oct. 15. “Because, we would have departed from the principal of pari passu.”

A group that holds about 40% of Zambia’s $3 billion in outstanding Eurobonds has already said it won’t support the proposal.

The government has a 30-day grace period to make the interest payment it missed last week before a default event occurs, which would allow bondholders to demand immediate repayment of the principal.

Dr. Ng’andu, who started the job last year, needs to balance the competing interests of Eurobond holders and mainly state-owned creditors from China, to whom Zambia owes even more money.

Eurobond holders are demanding greater transparency and an endorsement from the International Monetary Fund.

Zambia says it is treating all creditors equally.

The government hired Lazard Freres as financial advisers in May to assist with what it called a liability management exercise of its then $11.2 billion in external debt.

The copper producing nation’s debt has since shot up to almost $12 billion, and a messy default is becoming increasingly probable.

Labels: DEBT, EUROBONDS, NEOLIBERALISM, WINDFALL TAX

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posted by MrK @ 2:40 PM 1 Comments

(THE MAST ZM) Haabazoka calls for repossession of mines

COMMENT - On a small note of disagreement, I don't agree with prof. Haabazoka about economic targets if that means 5 year plans, and I don't think PAYE is a great idea, however those are just two prescriptions that I think there are more modern variations to. It is unacceptable that the mines, for instance through the illegal practice of transfer pricing, declare a loss year in and year out, or that dividends are not paid to ZCCM-IH, which today is a holding company with a very conflicted board of directors. They also neglect to collect dividends from the mines. I completely agree that the mines should be state owned. And there should be cheap credit for small businesses, farmers, consumers - official lending rates are prohibitive and have been for decades.

1. CopperCoin

How about a local crypto currency backed by copper?

https://www.themastonline.com/2018/02/23/iran-russia-consider-own-cryptocurrencies-after-venezuela-success/

2. Drought proofing farmland

Which can probably be promoted under the banner of combating the effects of climate change. The army probably has enough equipment to train recruits, a skill that can carry over into civilian life. And prevent the yearly flooding by storing water in the soil.

https://www.harvestingrainwater.com/2016/11/27/brad-lancaster-with-warren-brush-co-water-for-every-farm-earthworks-for-resiliency-in-an-era-of-drought-april-5-8-2017-hyder-az/

Brad Lancaster learned a lot from the Zimbabwean dry land water pioneer Mr. Zepheniah Phiri Maseko.
https://permaculturenews.org/2016/07/28/evolutions-mr-phiris-water-harvesting-plantation-1995-2016/

There are a lot of things that can be done in agriculture, manufacturing and education.

3. Manufacturing from locally grown agricultural products

How to make a HQ handmade Cigar
https://www.youtube.com/watch?v=ohVnoo2DC0g
Notice the prices
https://www.jrcigars.com/

Turning maize surpluses into storeable and exportable distillates, which would also help create a permanent market for maize surpluses for local farmers:

How to
http://www.whiskeyprof.com/basic-distilling/
Bourbon sells for $4,000 to $15,000 per barrel
https://www.forbes.com/sites/johnmccarthy12/2017/04/04/how-to-buy-a-barrel-of-bourbon/2/#7f985b681bfb

4. Horticulture

There are crops that can be grown besides maize and that have a very high return or are labour intensive.
https://modernfarmer.com/2017/07/5-valuable-crops-can-grow-us-grow/

If a market for small to medium sized farms is created, there has to be technology developed to meet their needs, rather than technology for giant corporations. The universities can be of help here. For example:

Quick Cut Greens Harvester (Official)
Farmer’s Friend
https://www.youtube.com/watch?v=OPIfw5_WoLU

5. Redistribute land

" The Northern Rhodesia (Native Trust Land) Orders-in-Council of 1947 created Trust Land as a result of pressure from the white settlers who demanded security on the land they occupied. Trust Land constituted about 58%. This was actually an extension of crown or state land to 64% while the reserve land for the local people was reduced to 36%. "
http://maravi.blogspot.com/2017/12/land-reform-in-zambia.html

6. Universal Basic Income

This is how you really stimulate the economy:
https://twitter.com/MrK00001/status/827872456035663872

There has to be a serious discussion about the end of 'jobs' which is universal, including in mining, a relentles tide caused by automation and innovation. People still need incomes, even without jobs. There has to be a concerted effort to eliminate poverty.

7. Democracy

The government has to do what the people want it to do. No more capture by the IMF, or corporations. Major decisions have to be put to a referendum - taking on debt, negotiating trade deals, going to war, etc. This is the only way to prevent rogue governments. It should be illegal for NGO's to take money from for instance Freedom House or the Open Society Foundations.

- MrK

Haabazoka calls for repossession of mines
By Chambwa Moonga on February 21, 2018

ECONOMIST Lubinda Haabazoka says Zambia’s mines ought to be under government ownership because the current model of private ownership is a failure.

And Dr Haabazoka, who is a University of Zambia (UNZA) lecturer, has noted that the current trend where Zambians are being over-taxed by authorities will not culminate into development for the country.

Speaking on The Assignment programme on Muvi TV on Sunday night, Dr Haabazoka inferred that mines under the current ownership model were not substantively contributing to Zambia’s economy.

“What we need to do [is that] the current model of mines being under private ownership is a failure. I don’t know how much taxes the mines are paying but when you look at ZCCM (Zambia Consolidated Copper Mines) in 1991, it made net profits of US$191 million. When you look at the mines from 1998 to today, all the taxes put together that they have paid are less than US$191 million! They (mine owners) are always saying ‘we are making losses’. So, they have failed. We need to get the mines under ZCCM again,”

Dr Haabazoka noted.

“Foreign investors can come and build malls, they can come and build factories – build motor vehicle manufacturing plants, we are not against that. But they should not run the mines! The mines should be under government. I’m a capitalist but also I’m for a mixed economy and I borrow from Russia… Look at our mines! Cobalt, I think, is selling over $40,000 per tonne. But where is that money going to? You cannot be running a shop for 15 years and continue making losses.”

He recalled that under ZCCM ownership, mines did more in terms of corporate social responsibility.

“When my father was a mine captain…my father just went up to equivalent of Grade seven. Our grandfathers and fathers took over the mines when the former president Kaunda was in charge. We didn’t have educated people but ZCCM built schools, roads, clinics and all the infrastructure that was on the Copperbelt,” Dr Haabazoka said. 
“FDI (Foreign Direct Investment) for Zambia, for example, contributes huge amounts of foreign exchange inflows but unfortunately there are very few countries that have developed using FDIs. A foreigner cannot come and develop your country – they can bring in new technologies.”

And Dr Haabazoka pointed out that Zambia seemed not to know where it was going.

“You need to have targets which you need to reach and those targets are beyond single digit inflation, stable exchange rate. Those [targets] are basically that of revolutionalising the way you do things; major success stories of economic development, the South Korean example, the Japanese example, Singapore, even the Rwandan experience – those are things that basically you can see going on where everyone in the nation has put their hands together and are moving the country forward,” he said.

“At the moment, we don’t know what we want to achieve; do we want just to merely stabilise macro-economic indicators? Do we want to continue accumulating debt? Are we infrastructural wise? Where is our youth policy? Where are we going? What is happening to our manufacturing industry? What of our mineral wealth? How is economic development happening?”

Haabazoka added that from independence, Zambia’s government knew that it wanted massive investments and that it created its own manufacturing industry as well as enhancing infrastructural development.

“[But] from 1991 we lost it until 2001 when we stabilised the damage that was caused…by the huge debt that we had. Mwanawasa’s period was much more of a stabilising period, trying to get rid of the debt. In my opinion, now we should have that economic development that is aimed at trying to reduce…. We have gone back; from stabilising and reducing our debt to US$600 million, we started accumulating it after 2011 and now we are in massive debt. Now, we are supposed to start doing what we were doing from 2001 – stabilise issues so that in the future we start growing,” Dr Haabazoka said.

“As a country, we are hugely divided; the country basically is divided into red and green – tribal divisions! Everything that happens in the country people see it through political lenses, through surnames of individuals – there is a lot of disunity. People might disagree with me but basically that is what is obtaining.”

He also regretted that Zambians only spoke of economic diversification when copper prices were below $4,000 per tonne.

“When you look at economic diversification per se, you need both government and citizens to actively participate in it. First of all, you have to say what it is that we are dependent on. You are going to choose the mining industry. [But] can we use the mining industry to diversify our economy? Yes, we can!” Dr Haabazoka said.

He also observed that Zambians had fallen in love with money.
“I don’t know where that has come from. When you call a Zambian to come and do something, they are going to charge…. Some people even charge $500 per hour just to come and help solve the drainage…,” Dr Haabazoka observed.

Meanwhile, Dr Haabazoka noted that what was currently obtaining in the country’s economy could not propel Zambia to development.

“We cannot develop an economy on high taxes. There is no country in the world that has taxed its way into development. The current regime can change things, there is still time. They can actually do it within one or two years. But they have to do the following;

give a breather to citizens. There is no way you can be charging toll fees at K20 per motor vehicle. In a K20, a person on the street can buy pamela (rationed mealie-meal pack), eggs and make lunch for their family. Give a breather [because] there is no way you can tax your way into development,”

said Dr Haabazoka.

“The current Minister of Finance should bring back the Pay As You Earn to 35 per cent. Actually, 28 per cent is the best rate or most optimal tax for the current situation. You are going to see increased economy growth in the future. Those days if on a Saturday you went into a hardware shop, it will be packed. But nowadays you are just a few of you and it’s not because people don’t want to build; there is no disposable income [and] this is not politics. I’m just saying what is on the ground!”

Labels: DEBT, INFLATION, LUBINDA HAABAZOKA, NEOLIBERALISM

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posted by MrK @ 12:12 PM 5 Comments

PF Refuses To Collect Dividends, Takes On Eurobond Debt Instead

COMMENT - The Eurobonds, IMF/WB, Privatisation, Anglo-American Corporation and it's many holdings (De Beers, Tongaat Hulett) all lead back to the same family and banks. When dealing with one, you are also dealing with the rest.

ZCCM-IH says FQM defrauded it repeatedly from 2006 to 2012 by hiding profits from Kansanshi Mining Plc and using proceeds from that period of high copper prices to build other mines without its consent as a shareholder.

The FQM executives sued by ZCCM-IH included chairman and chief executive officer Philip Pascall and directors Arthur Mathias Pascall, Clive Newall and Martin Rowley.

Mike Mulongoti:

He further asked the rationality of Zambia yearning to borrow from the International Monetary Fund (IMF) an amount of US$1.6 billion when they were in cahoots with FQM over US$1.4 billion.

We are convinced that they must have been paid because there is no way they can insist on going to the IMF to borrow US$1.6 billion and yet there is more than US$2 (billion) from the mine that they are trying to collect. How can that be?

Because the family that owns the mines is the same family that controls the IMF/WB, and they're making money both ways.

(THE MAST ZM) State House wants to rob Zambians through the ZCCM-IH, FQM fraud case – Mulongoti
Malawo Malawo

MIKE Mulongoti says State House’s attempt to rob Zambians out of billions of kwacha from First Quantum Minerals must viciously be watched and later followed up.

According to reliable sources, State House has bowed to pressure and is forcing Zambia Consolidated Copper Mines-Investments Holdings (ZCCM-IH) to discontinue the fraud case in which it claims First Quantum Minerals (FQM) swindled it out of US$1.4 billion.

In November last year, ZCCM-IH, which holds shares on behalf of the Zambian government in the privatised and now foreign-owned mines, sued FQM in the Lusaka High Court for fraud and simultaneously commenced an arbitration process in London in an attempt to recover the money.

ZCCM-IH says FQM defrauded it repeatedly from 2006 to 2012 by hiding profits from Kansanshi Mining Plc and using proceeds from that period of high copper prices to build other mines without its consent as a shareholder.

The FQM executives sued by ZCCM-IH included chairman and chief executive officer Philip Pascall and directors Arthur Mathias Pascall, Clive Newall and Martin Rowley.

On April 21, 2017, Arthur, the director of operations, wrote to Attorney General Likando Kalaluka requesting him to force ZCCM-IH to drop the matter that is actively before the courts of law. The FQM directors also asked Kalaluka to protect them from prosecution. As the matter continued being battled in the Lusaka High Court, State House press aide Amos Chanda announced on May 10 that President Edgar Lungu would interfere in the ongoing legal dispute between ZCCM-IH and FQM and direct the matter to be settled outside the courts of law.

And last week, while the case was being heard in court, the Ministry of Finance issued a statement saying the first round of negotiations on the matter were fruitful.

Commenting on the matter, Mulongoti, the People’s Party president, observed that there was no morality in President Lungu’s government. He wondered what incentive was there for President Lungu, who recently hinted that he did not interfere in active court processes, to now call for a friendly resolution of the ZCCM-IH and FQM legal battle.

We have a problem when it comes to the issue of integrity in the PF government. The President, together with his spokesperson, has emphatically said they will not interfere with any court issues. When the outside world and everybody was persuading him to secure the release of HH (Hakainde Hichilema), he refused! Now, there is a court process (between ZCCM-IH and First Quantum Minerals) which involves resources of Zambia where ZCCM-Investment Holdings want to get money from an investor who has behaved dishonestly and he wants to intervene! How?

Mulongoti, who served as a Cabinet minister in various ministries during the MMD reign, wondered in an interview in Lusaka.

“This is a matter that must be followed up very viciously. What we’ll see is that they will become richer and Zambia will get poorer! They (FQM) have spent money that is supposed to come to Zambia on developing their own companies and the (ZCCM-IH) chief executive officer Dr Pius Kasolo is trying to get that money back. But for whatever reason, they (government) want to stop that money coming back to the people of Zambia.”

He further asked the rationality of Zambia yearning to borrow from the International Monetary Fund (IMF) an amount of US$1.6 billion when they were in cahoots with FQM over US$1.4 billion.

We are convinced that they must have been paid because there is no way they can insist on going to the IMF to borrow US$1.6 billion and yet there is more than US$2 million from the mine that they are trying to collect. How can that be? Mulongoti asked.

“So, there is no reason to allow them even to go to the IMF if they can’t collect that money which is here! This issue of insincerity is not right and along the way, the people of Zambia who are suffering will demand for little more than just ordinary explanation.”

He cautioned those who were currently looting public funds in the PF government that money could not be hidden.

They have become so rich such that some of them don’t even know what to do with the money. There is no secret in the world today -whether you’ve hidden your money in South Africa, Dubai or wherever, we’ll get to know and the people of Zambia will demand for that money, cautioned Mulongoti.

Labels: CORRUPTION, DEBT, EDGAR LUNGU, EUROBOND, FQM, IMF, NEOLIBERALISM, PF, PRIVATISATION

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posted by MrK @ 7:25 PM 7 Comments

Edith Nawakwi On The Kwacha, Minister Chikwanda And The PF

COMMENT - The problem is deeper than incompetence or a failure to listen. It goes right to the corruption that flows from the World Bank and IMF system like a tsunami. The former Finance Minister Caleb Fundanga's MEMFI institute now works with the World Bank, IMF, Bank of International Settlements, and the National Treasury of South Africa. He is presently located in Zimbabwe, a country he disparaged for it's economic policies.

See: (LUSAKATIMES) Fundanga opposed to suggestions to adopt the US dollar as national currency
September 4, 2015

The simple fact is this: as long as the mines are in private hands, the politicians will be bought off by the De Beers/IMF/World Bank cartel.

(THE POST ZM) Government officials now have kwacha diarrhoea - Nawakwi
By Mukosha Funga |
Updated: 06 Sep,2015 ,07:00:18

GOVERNMENT officials now have diarrhoea over the fast depreciating kwacha because of failure to heed to advice early on, says FDD leader Edith Nawakwi. And Nawakwi has charged that Zambia has a sleeping government. Meanwhile, Nawakwi has warned that Zambians will sit on the runway to prevent President Edgar Lungu from landing if he misuses public funds for party functions while in New York.

Nawakwi has over the last four years been calling for the dismissal of finance minister Alexander Chikwanda, saying he is ‘incompetent’. On March 18, Nawakwi attributed the continued depreciation of the kwacha to lack of economic understanding by President Lungu and his ministers and warned that the local currency would one day reach K15 to a dollar.

But government officials dismissed her statement as mere politicking.

However, six months on, the kwacha has breached the K10 psychological barrier,
trading at an average rate of K9.90 and K10.05 for buying and selling on Friday.

In an interview yesterday, Nawakwi said the kwacha has depreciated rapidly because of the government’s failure to listen to advice.

“When I said the dollar will reach K15, they were telling me that I was sick. Now I want to know who has diarrhea. Is it me or them? They were saying ‘Nawakwi is sick, she is politicking’; now let them talk. Instead of discussing the problem, they are playing golf. We told them [that] this Minister of Finance is going to take this country to the knife edge bridge. I haven’t even closed my mouth, where is the Minister of Finance? Where is he hiding?” she asked.

“They have been accusing me of politicking, so now I will start politicking. When I am advising them professionally, they don’t want to listen, someone is snoring and sleeping. Mwebantu ba mu Zambia, twapapata fumeni mubebe aba bantu ati beme bambe ukwenda! (You people of Zambia, I plead with you to come out and tell these people to stand up and start walking).”

Nawakwi said it as said that Zambia had a sleeping government.

“The kwacha has gone over K10 and the Central Bank and the Minister of Finance are sleeping. When a currency has slid this much, normally, speculators tend to go in and purchase the kwacha by bringing in dollars, praying that in the next one week, it can change and they can make profits. This is the best time that anyone who has dollars would have wanted to bring the dollars into the banking system. Those who have dollars in the mattresses, in the market, this is the best time because they can see that from one dollar, they will get more than K10 because we have a sleeping government,” she said.

“They are just snoring and not thinking about what is going on. They are still maintaining this archaic law which we put up in the 1980s which said that because there was a shortage of dollars - in fact this was a Katele (Kalumba) law - that there should be a restriction on how much dollars you can take out and how much dollars you can deposit. That was the reason for that. There was a shortage of dollars, there was no money, now this man has gone and borrowed Eurobonds which we can’t even see. Can they stop sleeping and take out the blankets from their heads and start to think! Stop playing golf! This is not time for golfing, sleeping and fundraising. This is the time for serious economic reflection.”

Nawakwi said not even diverting the US$120 million of borrowed money into the market could save the kwacha.

“I am asking [Bank of Zambia Governor] Dr Denny Kalyalya to lift this administrative hindrance where there is a restriction on deposit of dollars because that’s the only way we can mop up the dollars which are in mattresses and help the kwacha. It is not just by him releasing the few [dollars] which the minister borrowed a couple of months ago,” she said.

“I want them to answer me. I want those people who were saying ‘Nawakwi shut up’ to start talking now. I am urging them to open their mouths now. Talk baba, talk! Talk time yaoneka, talk! What is happening to the kwacha? We told them, even if it is a global phenomenon, it can be mitigated if you don’t have a deficit, the one that they have. This phenomenon of the sliding kwacha is being accelerated by the excessive expenditure, over borrowing and lack of alternative sources of income.”

Nawakwi said the argument that what was happening to the kwacha was a global phenomenon could not hold as the depreciation of other currencies was not as bad.

“Don’t tell me that because my neighbour is walking naked, I should also walk naked. That is wrong thinking! Because Tanzania has the same problem but they are not as hard hit as we are in this country. I wish I could be given a chance to talk to this Cabinet because it appears that the whole Cabinet is asleep,” she charged.

Nawakwi said the current massive load-shedding was worsening the economic situation.

“These people shock me; they are telling us we had a drought, isn’t this the same government which was telling us that we could not take ballot papers because of the heavy rains and the results could not come on time? They had to airlift the ballot boxes. Even the Minister of Agriculture said we have a bumper harvest because we had good rains. Now all of a sudden, in six months, they want to tell us there was a drought?” she wondered.

“How can you tell me, a Zambian who comes from Luapula, that we have a drought in this country? Does Egypt have dams? Does it have rainfall? In Egypt, does the Nile have waterfalls like we have here? The Nile is shared by so many states, fighting for the little water. Have you ever seen in Egypt where they cannot pick ballot boxes because there is too much rainfall? The answer is a simple no. They have a desert, one river and they have more power than this country where we have too much water.”

Nawakwi said the country lacked leaders with functioning brains.

“Ukutuka Lesa tuleke. Lesa alitulambula, alitupela fyonse efyo tufwayika. Efyo ta twakwata fye ni abantu abakwete ama tompwe ayaleshinguluka bwino muma office abo twapele inchito ati bane twafwilisheni. Pantu apa nafishupa. Ifilechitika lelo, Kwacha epo yafika, ninshi malilo, elo wingalaya namukutamfya aka bola wemukulu ne chinkonto, takwaba iyo (We should stop insulting God. God has blessed us with everything we need. What we lack are people with functioning brains in public offices who we have empowered to govern on our behalf. Because things are dire, what is happening today, how the kwacha has depreciated, amounts to a funeral. Is this the time a grown man should go and have the pleasure of playing golf, it is unacceptable),” she said.

Nawakwi also wondered why President Lungu could spend so much public money on campaigns but fail to pay the debt owed to the University of Zambia.

“There are 105 districts in this country; I am shocked that when we have no medicine, we have no books, the university can’t be paid but the President can buy 150 Land Cruisers purportedly for DCs when in fact, he is positioning district commissioners to be shadow MPs. He is sending them to start campaigning on public expenditure. You know, this kind of looting, I don’t understand it. This problem at the University of Zambia, we owe University of Zambia as a country K320 million. Now in dollar terms today, it is just $32 million. I am ordering minister Chikwanda to release $32 million dollars at the current rate of K10 to a dollar because that will resolve the problem at UNZA. That money doesn’t even have value to those who are owed,” she said.

Meanwhile, Nawakwi warned that Zambians would sit on the runway to prevent President Lungu from landing if he misuses public funds for party functions while in New York, where he will attend the UN General Assembly.

“We are seeing adverts that there will be a ‘Meet the President’ dinner in New York. Is it a PF trip? Or is it a government of the Republic of Zambia trip? How is he going to get to New York? Is he using an ox-cart or what? If it is a PF trip, I don’t want the policemen from Zambia to go with him. I don’t want the security team to go with him. Let him use PF security and use a chartered plane paid for by Patriotic Front. Honestly, if he goes on government expense, tell him he will have consequences which will be too dire to even contemplate,” she said.

“There will be no runway to land here. We are going to sit on the runway, he has to find his own runway. They should say that this is a private trip which he is paying for from his pocket since he has so much money now. But if he is going to New York just for fundraising for his political party, I don’t think I am going to accept it.”

Nawakwi said Zambians were the PF’s opposition in the 2016 elections.

“Anyway, he (President Lungu) has made our work very easy because in this country, this government of Patriotic Front doesn’t even need opposition. The people themselves are the opposition. They are feeling the heat, the people are angry; just walk into any shop, the problem is that this President can’t even go where we go. I am just walking downtown here in Cairo Road and he can come to Cairo Road and listen...he doesn’t even want to go on Cairo Road because he has created the dirtiest city in Southern Africa, but he is breathing fresh air there [at State House], playing golf,” said Nawakwi.
Related Stories
- See more at: http://www.postzambia.com/news.php?id=11099#sthash.HB4z1yyN.dpuf

Labels: ALEXANDER CHIKWANDA, CORRUPTION, DEBT, EDITH NAWAKWI, EUROBOND, IMF, KWACHA

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posted by MrK @ 9:42 AM 0 Comments

(HAITIAN TIMES) The Haiti-Greece Connection

Under the Radar
The Haiti-Greece Connection
July 29, 2015
By Max A. Joseph

Debt is an instrument of control and other insidious motives that have been in use since ancient times. Its potency painfully felt when the debtor becomes insolvent.

European Union member and bankrupt Greece may be thousands of miles away from United Nations-occupied and destitute Haiti, but the distance doesn’t preclude these two countries from experiencing similar issues inherent to the brutal nature of the global order.

Under a narrative that exculpates perpetrators and vilifies victims, these two countries are portrayed as unsuitable to their neighborhood and, by extension, unworthy of sympathy from their more affluent and powerful neighbors. Succeeding generations of Greeks, like their Haitians counterpart, will have to deal with the nasty consequences associated with being an insolvent nation. It certainly does not help that the institutions equally responsible for the Greek debt crisis – Europe Central Bank, the giant international banks and the IMF– are the ones formulating the solution.

Let’s start with Greece, a country of 10 million inhabitants and a national debt of $380 billion. As a member of the world’s largest economic bloc, the country certainly possesses many advantages that may be appealing to lenders. However, were these “advantages” sufficient enough to warrant such vote of confidence in its ability to repay this massive debt? Absolutely not; despite a highly-educated workforce, Greece is essentially a developing economy that relies mostly on tourism and agricultural exports.

It will never be able to pay off this enormous debt.

Because the global economy is interwoven, the Greek debt crisis remains a threat to global prosperity seeing that it could usher a domino effect, engulfing other heavily indebted and much larger EU economies. That being said, shouldn’t the international lenders shoulder part of the blame and absorb some of the losses that come with Greece’s inability to fulfill its contractual obligations?

In a normal situation that would be the reasonable thing to do but in the arcane world of international finance, such mundane solution is anathema because portion of the debt are essentially investments made by states and private pension funds on behalf of retirees. Though most of the debt is nominally owed to EU governments and banks, their true ownership might be retirees from Cleveland, Ohio; Marseille, France, Manchester, England, or Munich, Germany. These retirees no doubt will not be asked to take smaller retirement checks because of bad decisions by mutual or hedge funds and banks or the Greeks’ inability to pay.

Predictably Alexis Tsipras, the Greek prime minister, was fighting a losing battle despite the popular support expressed in the July 5 referendum in which almost 62 percent of his countrymen convincingly rejected the burdensome conditions of the EU lenders and the IMF. As recently as the beginning of the twentieth century, Greece would have been invaded and occupied by national armies seeking to collect on behalf of their respective banks. Fortunately for the Greeks, that primal approach to collecting debts has been in hibernation, meaning not completely abandoned, under the 1944 Bretton Woods Accords, which created the ultimate mechanism (IMF and World Bank) for a collective and more effective control of international finance by the western powers.

Likewise Haiti, a perennial outcast in the international arena and current holder of the unenviable title of “poorest country in the western hemisphere,” was not so lucky. Its path to poverty — perpetual political turmoil and insolvency, though wholly different than that of Greece– is consistent with the characteristics of international relations. July 28 marked the hundredth anniversary of Haiti’s first occupation by U.S. Marines on behalf of U.S. corporations, which lasted nineteen years (1915-34.)

Whereas Greece’s monstrous debt originated with bad decisions by that country’s leaders and greedy international lenders, that of 1915 Haiti in contrast was the end result of bullying and robbery by France.

To sum it up, the sacrifices made by the more than one hundred thousand slaves that perished during Haiti’s war of independence (1791-1803) were nullified when France, with the backing of England, Germany, Spain and the U.S. navies, imposed a huge indemnity on the young republic in exchange for a formal recognition of its self-liberation. Apparently NATO (North Atlantic Treaty Organization) informally existed prior to its founding in 1949.

Adding insult to injury, Haiti was forced to borrow the money from French banks at an exorbitant rate, which inevitably bankrupted the country. The National City Bank of New York, aka Citibank, would later acquire the deed to that loan from under the U.S. occupation whose premise (the Monroe Doctrine) could not tolerate the presence of a European competitor.

When a comprehensive account of the April 1825 naval blockade of Haiti and subsequent U.S. occupation of that country on July 28, 1915 is finally written, preferably by non-western historians, these two episodes will rank among the most severe punishments ever meted out on a defenseless little nation by predatory powers.

Ever since ancient Greece was yanked from the Ottoman Empire by the British and resurrected in 1830, it has been unable to find it’s footing in a neighborhood infested with predatory powers. Haiti, which came into existence in the course of a hard fought struggle against slavery and colonialism, has been in a corresponding situation since its inception in 1804. Until small countries like Greece and Haiti find a way to extricate themselves from the grid, they can expect more of the same.

About Latest Posts

Max A. Joseph Jr.
Max A. Joseph Jr. is a small business owner and consultant who writes about politics.

Labels: DEBT, GREECE, HAITI, IMF, World Bank

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posted by MrK @ 3:26 PM 0 Comments

Zambia’s future bleak due to incessant govt borrowing

COMMENT - There would be no debt at all if the government simply collected stiff Windfall Taxes from the mines. The debt is doubling, the currency is under pressure instead of increasing because of all the value flowing into the Zambian economy out of the mining sector. Who is the lunatic now, Finance Minister Chikwanda?

Zambia’s future bleak due to incessant govt borrowing - Haabazoka By Misheck Wangwe and Stuart Lisulo | Updated: 26 Jul,2015 ,11:22:25

THE future of Zambia is bleak looking at the incessant borrowing being made by the PF government, says Copperbelt-based economist Dr Lubinda Haabazoka.

The Zambian government on Thursday issued a US$1.25 billion Eurobond, the highest ever, to be repaid in 10 years.

The facility, which was over-subscribed by US$500 million, is the third that Zambia has issued under the PF regime, at 9.37 per cent interest annually.

But Dr Haabazoka, who is also a senior lecturer of business studies at the Copperbelt University, said looking at the expenditure by allocation, much of the borrowed money might even go to consumption.

“No country in the history of economic development has ever developed on borrowed funds. One might argue that governments issue treasury bonds to develop their economies but the type of borrowing that we have seen is unprecedented. In 2011, Zambia only owed US$1.2 billion in foreign debt and now it owes more than US$7 billion. The rate at which we are acquiring debt is very high,” he said.

Dr Haabazoka said what was more worrying was that the sources of income were narrowing and the country’s economy was being run on borrowed funds.

He said the government could have cut down unnecessary expenditure such as scaling down the size of government and doing away with projects of low priority.

Dr Haabazoka said thinking that borrowed money was the only source of the national budget or running government was a misplaced ideology.

“This year is going to be the worst economically, after 15 years, because of the huge budget deficit due to lack of proper planning on the way government is supposed to be run. Look at the energy crisis! It will cost businesses because Zesco and government have recorded huge losses in terms of missed revenues and opportunities. Look at the fuel sector! There are huge losses; Indeni has shut and businesses that depend on generators to backup their energy sources have huge challenges to operate. Economically, our performance is dismal as a nation,” Dr Haazoka said.

He said the state of the economy was making it extremely difficult to operate smaller businesses.

“My advice to finance minister Alexander Chikwanda is that he must make this loan his final for the next two years. Those working in government must help in coming up with a strategy on how revenue collection could be improved without burdening the already overburdened labour force and formal sector,” Dr Haabazoka said.

He said the proceeds from the Eurobond were not likely to benefit Zambia’s economy owing to the massive externalisation of financial resources in the construction sector among foreign contractors.

“I see a lot of externalisation of resources because most contractors that are going to work on these infrastructure developments are Chinese and other foreign nationals so we are basically borrowing for foreign economic participants,” Dr Haabazoka added.

He also said the government’s intention to address the widening budget deficit, which is projected to soar to around K20 billion from K8.5 billion by accumulating new debt, will actually widen it even further next year.

“In trying to solve a budget deficit by borrowing, we are actually creating a wider deficit for the next year so basically, we are not solving anything! The easiest way to solve a budget deficit is to reduce unnecessary expenditure. You have to prioritise which sectors need money most and which ones can wait for the future,” said Dr Haabazoka.
- See more at: http://www.postzambia.com/news.php?id=9995#sthash.QdS8Zj5Q.dpuf

Labels: ALEXANDER CHIKWANDA, DEBT, EUROBOND, LUBINDA HAABAZOKA, NEOLIBERALISM, PF, WINDFALL TAX

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posted by MrK @ 5:28 PM 0 Comments

Chikwanda misleading Sata on debt - Nawakwi
By Henry Sinyangwe
Fri 24 Jan. 2014, 14:01 CAT

EDITH Nawakwi says finance minster Alexander Chikwanda is misleading President Michael Sata on debt sustainability following the government's path of 'reckless' borrowing. And Nawakwi who is FDD leader says the country is experiencing the worst farming season since independence owing to the late delivery of inputs.

In an interview following Chikwanda's statement during ZNBC's Sunday Interview that Zambia will not slide back into a debt trap, Nawakwi said Zambia's debt would be unsustainable if the government continues on the binge of borrowing from the commercial window.

"When they took over government about two years ago, the total debt was US$1.7 billion, as we are talking now, the debt is over US$3.5 billion and they are planning to borrow an addition of US$4 billion in the next two to three years. Then you add all these figures, the amount of debt that the PF will accumulate on behalf of this country by the end of their first term will be over US$8.2 billion, far much more than what the people of Zambia tightened their belts for and managed to clear in the 27 years of UNIP government," she said.

Nawakwi said the government should explain where it would get the money to service the debts.

"If the President today assures us that the debt is sustainable, the question he must answer is; where is the income that is going to service the debt, because the private sector is not growing, the trade sector has been strangled by the introduction of exchange controls, the international reserves are at their lowest in the last two years," she said.

Nawakwi said there were policy inconsistencies in the economy that had sent a wave of scare to the business community.

"The business community is in limbo and doesn't know what next this government is going to introduce," she said.

Nawakwi also said the agriculture sector was also being mishandled.

"If the President is saying to us that the budget is on track, can I be told why there is no urea in Chongwe. This is end of January and these are some of the policy inconsistencies which instead of generating cash from the agriculture sector, from the industrial sector, from the trade sector, these sectors are being strangled because the President doesn't want to face reality of our advice that this minister Chikwanda needs to be assisted to rest," she said.

Nawakwi said there was fear of hunger next year because the agriculture sector was not being properly run.

"And if you don't finance agriculture, you are going to have hunger the following year, you need money to import food to be able to feed people. Proper financing in the agriculture sector can help the government achieve even a 12 per cent growth in one year. Get half of the money that these people are overpricing in the road contracts and put it in agriculture, we could have surplus food for export and the money earned can be used for infrastructure development," she said.

"There is no malice in telling people that you are strangling our economy, and that's what they have done. What minister Chikwanda has created by the Statutory Instrument which is basically for control of foreign exchange, he has created a huge parallel market for the dollars, can the minister come out in the open and tell us why there is shortage of foreign currency in the system?"

Nawakwi said there was no government that did not borrow for infrastructure development, but that the current borrowing was unstructured and unregulated.

"We are happy about having a bridge in Chiawa, we are happy about having a road, we would even be happier if this government could realise that the same money they are using for the roads, they could finance the farmers and the profits from the farmers could be used to finance the roads. But what seems to happen is that they have a one track mind, they don't have the overview of what they can do as a government to generate money and also continue to undertake the infrastructure development," she said. "And that's why we are saying the debt is unsustainable because they are not able to finance education, health and agriculture."

And Nawakwi alleged that the government was getting funds from the parastatals because it had run broke.

"The President is aware that the money we sent to Zambia Railways was collected back, the President should be aware that all the money that was sent to parastatals for various projects, the minister went and got it back because he burst the budget. So when you stand up and mislead the President, we all get baffled. Maybe the President wants to be misled, because ideally I wouldn't come to the defence of the Minister of Finance because the activities are not pleasing anyone," said Nawakwi.

Chikwanda, during the interview, also wondered why Zambians believed the International Monetary Fund more than their own government on the country's economic status.

Chikwanda said the government was not worried about issues to do with debt management because everything was on the right track.

And President Sata on Sunday posted on his Facebook page that the country's risk of external debt distress remained low as all debt indicators were below the indicative policy thresholds.

President Sata assured Zambians that the government was cautious about landing the country into another debt trap.

Labels: ALEXANDER CHIKWANDA, DEBT, EDITH NAWAKWI

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posted by MrK @ 4:04 PM 0 Comments

Zambia won't slide back into debt trap - Chikwanda
By Kabanda Chulu
Mon 20 Jan. 2014, 14:01 CAT

ZAMBIA will not slide back into a debt trap because President Michael Sata is a good economic manager who doesn't allow careless borrowing and excessive expenditure, says finance minister Alexander Chikwanda. And Chikwanda says people making assertions of his resignation are after his job.

Meanwhile, Chikwanda says the Industrial Development Corporation (IDC) is a reincarnation of ZIMCO that would be a holding company for all state-owned enterprises.
Chikwanda also wondered why Zambians believed the International Monetary Fund (IMF) more than their own government on the country's economic status.

He said the government was not worried about issues to do with debt management because everything was on the right path.

"2013 was a difficult year; there were lots of challenges but it also created opportunities for us to think and institute procedures and systems to effectively run the economy. The budget deficit ended at over eight per cent and one key factor was the increase in emoluments for public service workers, whose unions negotiated far above what was budgeted for and we gave in since we are a listening government," Chikwanda said during last night's Sunday Interview programme on ZNBC TV. "By-elections didn't contribute to the deficit since they are budgeted for and if the Electoral Commission exhausts what was planned, we do replenish their coffers. Even new districts are budgeted for, so those saying we lost focus and started appeasing people are wrong because President Sata is a good economic manager, who doesn't allow careless borrowing and excessive expenditure. Anyway, what is political about a school? What is political about procurement of fertiliser and medicines? We are committed fiscal discipline and we try to spend according to the budget. Of course, there are times when national priorities arise like the salary hikes for workers."
He said it was surprising that Zambians believed what the IMF says, rather than their own government.
The IMF has projected a 7.4 per cent budget deficit for Zambia, while the government has set it at six per cent.
"IMF doesn't run the economy and we have no programme with them. We are not borrowing from them, they are not the alpha and omega of truth because they are not adequately informed, especially when you just talk to an individual. Zambia is also IMF as a member and when a delegation comes into the country, we avail them all documents and they meet other stakeholders so IMF hasn't lost faith in this government; it is only one individual making his assessment," Chikwanda said.
He also said the government would not give in to demands by some people that the wage freeze be lifted.
Chikwanda said the government was committed to ensuring effective debt management systems.
"People are entitled to express their opinions but we listen attentively even to my predecessors. Last month, Dr Situmbeko Musokotwane made some valid remarks in Parliament and we noticed that what he said made sense but there are some former finance ministers who pour scorn on me for no apparent reason since they don't have details," he said. "We are not worried because we are doing the right thing on debt management. The agreed norm is that for internal borrowing the threshold is 25 per cent of GDP but our debt stands at K17 billion, which is 15 per cent of GDP and for external borrowing, the threshold is 40 per cent and our debt is US$3.1 billion which is 14 per cent of GDP, so we are far below the agreed norms."
Chikwanda said budget deficits should be discouraged because the government pays a lot on debt servicing.
"This is why we are putting in place measures to generate enough revenue so that we can avoid borrowing. Of course, some people are saying windfall taxes for the mines but that is a 'fetish' which some people want to hang on to whether it is logical or not. We do understand that contribution of the mining sector is very low at five per cent but we shouldn't just look at taxes; there are other factors like having the mines generating 70 per cent of foreign exchange and creating jobs," he said. "Ideally, we want to see the mines contributing about 10 per cent and ZRA is being strengthened to ensure efficient revenue collection."
Chikwanda said his mission in government was to serve the people and not to make money.
"I will step down when I decide; I am here for a purpose…to serve people. Poverty levels are too high and it is shameful, so we need to do something collectively. I am not here for money and I can't comment on the issue of resignation because I have never contemplated that issue. Some people have invented something which is not on my radar, not in my plans," he said. "Those saying that are after my job but they should know that I am not excited anymore; I have passed 75 years but I work not less than 13 hours a day, so I will leave at the right time. I was here in 1973 when I was 36 years old; I just want to serve the people."
Chikwanda also said the IDC was in the process of being established with funding from the privatisation trust fund and would be a holding company for parastatals to operate the way ZIMCO did.

Labels: ALEXANDER CHIKWANDA, DEBT

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posted by MrK @ 2:20 PM 0 Comments

Nawakwi questions govt borrowing
By Henry Sinyangwe
Sat 28 Dec. 2013, 14:01 CAT

FDD leader Edith Nawakwi has questioned the intention by government to borrow more money to finance the budget. Meanwhile, Nawakwi says 2014 will present hunger and inadequate funding to government departments.

Government next year intends to borrow K9.64 billion to finance part of the budget for 2014, which is about 22.6 per cent of the national budget. Government last November raised the country's debt external debt ceiling from K20 billion to K35 billion.

Nawakwi said President Michael Sata should get rid of Chikwanda to save the country from another calamity of a debt trap.

"Time has come for the honourable Minister of Finance Alexander Chikwanda to shift from his current position into retirement. I know that a lot of us don't like doing the honourable thing, that is to resign from one's position. So the President of this Republic must save this country from the impending calamity of pushing Zambia into another debt trap," Nawakwi said.

She said the World Bank and the IMF had lost confidence in the economic management of the country.

"Today's reading that they are worried is just a tip of the iceberg. The truth is IMF is headed back to set up camp in Lusaka in January 2014 because they do not believe that Chikwanda is managing our economy competently. This is coupled with his inability to listen to those of us who he terms 'street people' when we talk about his lack of knowledge on management of our fiscal regime in this country. There are 13 million of us in this country and for sure, we must have one child somewhere in the corners of Zambia who can serve this country with diligence, competence and direction," said Nawakwi, who once served as finance minister in the Frederick Chiluba era.

She said some ministers were arrogant.

"Early this year, I raised the alarm that the budget had burst, that the Minister of Finance was not in the frame of mind to be able to control the runaway expenditure. There was hue and cry from the ministry. They tried to justify their actions to the point where even the likes of labour minister Fackson Shamenda had to criticise my persona. I then still raise the alarm that by January 2014, IMF is setting up camp again in Zambia due to their lack of confidence in the management of our economy by the current Minister of Finance," Nawakwi said.

She said the country no longer required Chikwanda's services.

"If the President does not listen to this very serious and timely advice, he has himself to blame for what Zambia is going to be in the next three or four years. 2014, we will be faced with hunger; 2014, we will be faced with inadequate funding to departments and ministries. We have doctors and nurses on strike, the Minister of Finance is mute; we have no medicines in the hospitals, we have no mealie-meal in several places and the buck stops at the Ministry of Finance," Nawakwi said.

She said she did not understand why President Sata thought Chikwanda was the only Minister of Finance the country could have.

"If the President is not able to relieve him, I think my brother should be honourable enough to say he needs to rest and allow younger people to be able to assist this country," Nawakwi said.

"This is a person who wants to export copper ore, this is a person who doesn't care whether nurses are on strike, this is the nominated member of parliament who doesn't care about the state of the University of Zambia. Unless we clear the stumbling block at the Ministry of Finance, whether it is PF, FDD, UPND, we may dance and cry, the buck stops at the Ministry of Finance."

She also expressed worry that Chikwanda signed the SI allowing exports of copper concentrates without any charge, which was later reversed by President Sata.

"If my minister doesn't understand that gold and other precious minerals are not found in independent mines, they are by-products of copper concentrates and he wants to give it as a Christmas gift to some companies, what can we discus? We are simply sitting on a time bomb," Nawakwi said.

She said a lot was sacrificed to get Zambia's debt written off, hence the country could not sit and watch mismanagement of the economy in the name of PF and some ministers in government.

"The reason we are having so much ineptitude is due to the fact that some of these brothers are nominated MPs. You go to Ministry of Education, there is no progress, you got to finance, he tells us 'shut up, you are advising me from the streets on windfall tax', you go to Ministry of Agriculture, the gentleman doesn't even know when we should plant our seeds. You go to Ministry of Health, there are problems. You go to Ministry of Justice, you want to get the constitution on time, who does he report to? He has no constituency apart from number one the President," Nawakwi said.

She said the country was facing major problems because critical ministries were manned by people who had no constituencies.

"These nominated MPs are living in ivory towers and as far as I am concerned, my only advice to President Sata for 2014 is to get rid of this lot. Let him nominate women and see what they can do. Let's get a different direction for 2014 and that can only happen if we come to 2014 without my brother Chikwanda at the helm of our treasury," Nawakwi said.

She said Chikwanda must not take the country to the days when a head of state must start telling the nation to tighten belts.

"This is the time when we need to loosen our belts. If you are going to injure us in this way, we are going to fight. This is injury, especially for those of us who spent long hours, days negotiating with the international community to write off our debt," said Nawakwi.

"People like ABC have not experienced what it takes to negotiate a debt write-off, to camp in a foreign capital, begging. He has not experienced what late Cardinal Mazombwe experienced and many Zambians who fought to get the debt written off; that's why he is so arrogant."

Labels: ALEXANDER CHIKWANDA, DEBT, EDITH NAWAKWI, FDD, MICHAEL SATA

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posted by MrK @ 1:33 PM 0 Comments

Rate of govt borrowing is alarming - Haabazoka
By Misheck Wangwe in Kitwe and Stuart Lisulo in Lusaka
Mon 02 Dec. 2013, 14:00 CAT

THE rate at which the PF government is borrowing and the manner it is managing external debt is very worrying and alarming, says Dr Lubinda Haabazoka.

And Dr Haabazoka says the introduction of windfall tax is inevitable in Zambia because appropriate mine taxes should be the major source of national financial sustainability. Meanwhile, Professor Oliver Saasa has advised the government to invest more in understanding its capacity to servicing debt.

Commenting on the decision by Parliament to pass a motion to give the finance minister powers to raise Zambia's debt ceiling from K20 billion to K35 billion, Dr Haabazoka, a Copperbelt-based economist who is also a lecturer of business studies at the Copperbelt University, said the government must begin to demonstrate fiscal discipline to avoid external borrowing.

He said the government's rush to get loans and debts being acquired through capital markets was an economic hazard.

"We can borrow as a country but we should not exceed certain limits, otherwise we will be pushing the debt burden to the future generation. Borrowing, even just for consumption when you have an expanded government, a civil service that is also bloated, then monies will just be servicing the existence of the government," Dr Haabazoka said.

"Let us first look at fiscal discipline, let us look at ways of maximising tax collection and then find ways of spending these scarce resources and cut costs in terms of government expenditure. The rate at which we are accumulating debt has doubled, it's very alarming and it is rumoured that in the next five years, the government will borrow US$5 billion dollars and that's very unsustainable."

Dr Haabazoka said developed countries like Japan were also overburdened by debt but the advantage was that their debt was domestically sourced.
He said the biggest problem was that the Zambian government was getting debt externally.

"If we are not careful as a country, we will find ourselves in a situation where the budget allocation to vital sectors will be competing with interests that come with debt repayment. We have to be careful," Dr Haabazoka said.

And Dr Haabazoka said the mines could not in any way suffer because of windfall tax, adding that by definition, the government would only tax excess profits.

He said mineral resources belonged to Zambians and windfall tax must be introduced so that mining investors would not always pocket everything once they get excessive profits.

"Windfall tax is a prerequisite for financial self-sustainability. When you look at the period of the late president Levy Mwanawasa when we had windfall tax, the country was doing well because we had resources and we embarked on large infrastructure development projects. Today, the mines are not paying enough taxes. Look at their contribution to GDP (Gross Domestic Product), it's very low and it does not represent a true picture of how much the mines were getting," said Dr Haabazoka.

He said there was need to enhance transparency in the way mining firms were declaring expenses and profits so that the government could collect appropriate taxes.

And Prof Saasa, who is chancellor of Mulungushi University and a managing consultant, said debt sustainability analysis was not necessarily 'objective'.

"Our debt sustainability analysis does not bring sufficient comfort to feel comfortable that we can continue borrowing. A debt sustainability analysis is required and we are not actually doing this with sufficient comfort, and government was the first to acknowledge that," Prof Saasa said.

He said there was need for the government to circulate the debt sustainability analysis in the public domain to allow for wider consultation.

"When these analyses are prepared, they should be put into the public domain so that people have an opportunity to look at them and guide government and become part and parcel of information sharing. They are subjective documents done by human beings and I am glad government conducted the analysis, but to share that information is equally important because that would have informed government that we can actually still extend it to K35 billion" he said.

"I am not so sure whether our parliamentarians were well versed in terms of the implications; probably, it was more of a vote according to whether one was PF or the opposition. The debt sustainability analysis should have been one of the documents that all parliamentarians should have been exposed to and simplified in a way so that by the time they go and vote in Parliament, they should feel comfortable that this document has indicated that for the next 5 or 10 years, the executive is allowed to go beyond the threshold, then the voting will be based on the facts rather than party affiliation."

Labels: DEBT, LUBINDA HABAAZOKA, OLIVER SAASA, WINDFALL TAX

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posted by MrK @ 7:16 PM 0 Comments

PF wants to slide Zambia into another debt trap - Magande
By Abel Mboozi
Sun 01 Dec. 2013, 14:01 CAT

COMMENT - "And Dr Situmkeko Musokotwane last week said the rate at which Zambia's external debt is climbing is worrying." Wow, really. This is the same Finance Minister who shielded the mines from taxation, and justified that by saying "We can always borrow". Short memories, perhaps, or just blatant hypocrisy and corruption?

Zambia now has more sources to borrow from - Musokotwane
By Bright Mukwasa
Fri 04 Mar. 2011, 04:01 CAT

‘Zambia can’t stop borrowing’
Written by Kabanda Chulu
Thursday, June 11, 2009 12:28:12 PM

" ZAMBIA can’t stop borrowing because available local resources are not adequate to sustain the financing of many projects around the country, finance minister Situmbeko Musokotwane has said. "

"“And the US $7 billion debt we had, in absolute terms it was a small amount by any standards but through our inability to service it, that was too huge because economic activities that needed to be sprouted out of that did not happen.” " - MrK

IT is sad that the PF wants to slide Zambia into another debt trap that would be difficult to dismantle, Ng'andu Magande has charged.
Magande, who is National Movement for Progress president, said it is surprising that the PF government is against the re-introduction of windfall tax on mines when it is the only sure way of raising reasonable revenue for the country.

He wondered why the PF government which campaigned on the premise of re-introducing the windfall tax was backpeddling over the matter and was now resorting to huge external borrowing.

"Even if the government does not want to re-introduce this tax on mines, what other tax sources are they intending to get money from in the mining sector? Money lies in windfall tax and the PF should tell the nation whether it is its policy not to implement the windfall tax," Magande said.

Levy Mwanawasa's government in 2008 introduced a windfall tax on copper at 25 per cent owing to the sector's low contribution to government revenue which still stands at less than two per cent.

Magande, as finance minister then, said the government envisaged to earn at laest U$415 million annually from the windfall tax as mining companies accounted for over 80 per cent of the country's export earnings.

However, Rupiah Banda's government in 2010 scrapped the tax amidst calls from civil society and opposition political parties to have it maintained.

The PF during its campaigns in the run-up to the 2011 elections promised to reintroduce the tax but finance minister Alexander Chikwanda last year, categorically indicated that the windfall tax would not be brought back and called those calling for its re-introduction 'lunatics.'

Commenting on Parliament's decision to allow Chikwanda to increase Zambia's external borrowing ceiling from K20 billion to K35 billion, Magande said in Lusaka yesterday that Zambians had now seen for themselves that the PF does not mean well.

He said the expansion of the mining industry in Zambia was fast and that was where economic growth was coming from.

"The expansion of the mining industry is very fast, that's where all this growth is coming from and then we have growth of six to seven per cent but poverty is still high because there is no equitable distribution of wealth which is supposed to be done by the government," he said.

He said taking the route of external borrowing would only take Zambia back into a debt trap situation.

"Why can't we really learn? It was going to be a different scenario if we had people in government now that have never served in similar capacities. The minister of finance has been in government before, so are President Sata and Vice-President Scott, so why can't we learn from those mistakes?" Magande asked.

"There is no doubt that the decision to raise the external debt ceiling would plunge Zambia into the Third Republic times, where her external debts would swell to unimaginable levels, which is sad."

Magande said former president Frederick Chiluba could not buy medicine in hospitals and that he built no single school then because he was servicing the external debt.

"Even medicines were in short supply because the government could not buy them. It is therefore, sad that the PF want to slide Zambia into another debt trap that would be difficult to dismantle," Magande said.

And Dr Situmkeko Musokotwane last week said the rate at which Zambia's external debt is climbing is worrying.

Dr Musokotwane, who is the immediate past finance minister, said it was saddening that Zambia's external debt which stands at U$3.2 billion was getting pushed up because of quick borrowing.

He was debating a motion in Parliament moved by Chikwanda, asking the House to permit him to increase Zambia's external debt borrowing ceiling from K20 billion to K35 billion re-denominated currency.

"The rate at which Zambia's indebtedness is climbing is too fast. Two years ago the debt was U$1.5 billion, today it's U$3.5 billion, in two years, you are talking of an increment of U$2 billion, this is too fast," Dr Musokotwane said.

"UNIP increased the debt from zero to U$7 billion in 27 years now we are increasing the debt by U$2 billion in two years, this is worrying people," he said.

Dr Musokotwane said in the Yellow Book, external debt indicated that a U$2 billion bond would be issued in 2014, meaning that the debt would shoot to over U$5 billion by next year.

"In three years, from U$1.5billion to U$5.7 billion, this of course is now getting close to where we were when we got debt relief, which is definitely worrying," Dr Musokotwane noted.

He said external borrowing of 75 per cent was substantial and raised questions.

Dr Musokotwane said the external debt could even be more than U$3.2 billion because he was not too sure the control called 'contingency liabilities' was included in the amount.

"These are amounts of money that can potentially become real debts. Of hand is the ZAMTEL liability; there is no question of the fact that the Libyan company(Lap-Green) transmitted something like close to U$400 million to acquire ZAMTEL," he said.

"Obviously they will not accept that such money goes into the drain, it is a contingent liability subject to judgment or agreement to the government and of course with time, we don't expect the US$400 million to be less than $500 million then."

He said the same applied to the Railways Systems of Zambia which has reverted to Zambia Railways.

"So, if you add all these plus other smaller amounts, I suspect we could already be owing U$3.7 billion which means that in actual fact, we could have already reached the existing limit perhaps even exceeded it. So, the debt issue is obviously a serious one," Dr Musokotwane said.

Bweengwa UPND member of parliament Highvie Hamududu in his debate said it was wrong for the government to premise the 2014 national budget on the decision to increase external borrowing.

Labels: DEBT, NEOLIBERALISM, NG'ANDU MAGANDE, SITUMBEKO MUSOKOTWANE

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posted by MrK @ 6:57 PM 0 Comments

Govt shouldn't borrow to finance abuses - Mwale
By Stuart Lisulo
Mon 11 Nov. 2013, 14:00 CAT

CHIPANGALI MMD member of parliament Vincent Mwale says continued government borrowing risks sliding the country back to high indebtedness.

Last week, finance deputy minister Keith Mukata told parliament that the country's external debt level had risen from US$1.7 billion in September 2011 to US$3.2 billion by September 2013.

Mukata said to avoid plunging the country into more speculative debt, the ministry had been conducting a Debt Sustainability Analysis on an annual basis in line with the debt management strategy, to determine Zambia's debt carrying capacity and fiscal space for new borrowing.
But Mwale, in an interview, said it would be very difficult for the country to keep borrowing at the current rate.

At the rate we are going it will be very difficult to have the fiscal space to borrow more money; we hear Zambia has been downgraded - the credit rating has gone down and it means the money we have to borrow now has to be at higher rates, Mwale said.

He questioned why the government needed to continue borrowing when there were still a lot of unaccounted for funds.

We have not been prudent. When you look at the Auditor General's report, there's a lot of unaccounted for funds, a lot of abused public funds. Why then not secure the little money that we have? Why not protect the money that we have? Because if we do, sometimes we may discover we don't have to go out and borrow, it is not necessary. Why should we borrow to finance abuses? It is not appropriate for us to go out and borrow internally and externally even before we take care of the resources that we have, said Mwale, who is also chairperson of the Parliamentary Public Accounts Committee.

He said it was important that all funds parliament approves for the Executive to use are protected if government borrowing is to be justified.

If we do that and we know that there is something that is lacking, people will understand if we said we want to borrow. Right now the President was commissioning the foundation stone at the airport; that is not going to be financed by our budget. I'm sure we are borrowing so that actually tells us that the debt stock has gone up, Mwale said.

He said the national budget under the PF government has "almost doubled" as compared to the MMD's last national budget, which meant that there were actually more provisions for government expenditure.

There is so much money at the disposal of the current government. The budget has grown, there's more they can do than what the previous government had, so why then do we want to go beyond that and even try to get more money from outside? If they cannot use this money that we have properly, it would be very difficult to justify why they should go out and borrow. And also the morality side of it, the people that will pay back are our children; the question they will be asking us is, 'why did you have to borrow and leave us with this debt and yet you had the money that was wasted?' It is not morally right to do that, he said.

Meanwhile, Mwale said he hoped the motion he moved last month would bring amendments to the current legislation that relates to borrowing to enable parliament have more powers to restrict government borrowing and introduce a 'debt ceiling.'

It is not just about us scrutinising them Executive but also it is in their interests that they quickly come in and bring in the necessary amendments because people will not see them as a party, we will be borrowing collectively as a country, said Mwale.

Labels: DEBT, KEITH MUKATA, VINCENT MWALE

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posted by MrK @ 4:47 PM 0 Comments

Chilufya calls for more effort in diversifying agriculture
By Abel Mboozi
Tue 05 Nov. 2013, 14:00 CAT

THE government should stick to planned activities and avoid unwarranted expenses if it to meet the 6.6 per cent budget deficit target in 2014, says UPND Bweengwa member of parliament Highvie Hamududu.

Hamududu who chaired the committee on estimates said the unprecedented 8.5 deficit of the Gross Domestic Product for this fiscal year was unacceptable and was mainly caused because of high unplanned for expenditure.

Hamududu said fiscal indiscipline by the government should be stopped because it entailed that the state spent more than it planned.

"If government continues implementing unplanned for policies and projects, then Zambia will continue having budget deficits and we might not achieve the target of reducing it to 6.6 per cent next year. The government should learn from this year's experience and correct things," Hamududu said.

He cited the funding to unbudgeted for new districts as well as the establishment of new universities that had contributed to the high budget deficit for this year.

"The frequent changes of PSs, where they are appointed and removed, these officers go away with benefits. The recalling of officers in foreign service as well their replacements too is another costly venture as there is repatriation expenses involved," he said.

"Ideally, before such measures are undertaken, government is supposed to budget for them, but this was not the case. The government should at all times consider the budget implication whenever it wishes to undertake such measures."

He said the creation of new districts should have been a well planned exercise that should have been undertaken in phases.

"Instead, these districts were announced, and DCs appointed and that was not planned for in the 2013 national budget and so, the key point is that we are telling the government to plan for unplanned expenditures by factoring them into the national budget," he said.

Hamududu said any new project the government wished to undertake should be slotted in the national budget.

On external debt, Hamududu said the rise in the debt stock was extremely worrying and if not checked, it could plunge Zambia into another foreign debt trap.

"The foreign debt currently stands at U$3. 1 billion which is unprecedented because when there was a debt write-off in 2005, it was way below U$1 billion, but within a period of seven years it has risen so high and our fear is that we could fall into another debt trap," he said.

Hamududu said even if the debt at the moment was still sustainable looking at the size of the economy, at the rate the debt was increasing was worrisome; more so that there were indications by the state to borrow another U$2 billion.

"This therefore means that by end of next year, our foreign debt could stand at U$5 billion plus which is not correct," he said.

And Hamududu said many stakeholders that appeared before his committee, including finance minister Alexander Chikwanda expressed concern that Zambia was not reaping much from its mineral wealth.

"In fact, Mr Chikwanda himself said Zambia was getting about five per cent in form of revenues from the mines when in SADC generally, the mines contributed about 11 per cent and so, we are quite below what mining houses in the region are contributing," said Hamududu.

"Clearly we are way below examples in the region. Other mine houses in the SADC region pay more and so Zambia is under taxing the mines.

Labels: ALEXANDER CHIKWANDA, BUDGET, DEBT, HIGHVIE HAMUDUDU, TAX EVASION

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posted by MrK @ 2:24 PM 0 Comments

Heavy spending on FISP worrying, says Kabaghe
By Gift Chanda and Chiwoyu Sinyangwe
Wed 16 Oct. 2013, 14:00 CAT

CONTINUED heavy spending by the government on FISP and the FRA at the expense of other agricultural programmes is worrying, says Chance Kabaghe. And Kabaghe, who is the executive director of the Indaba Agricultural Policy Research Institute (IAPRI), says the government should be careful not to stifle competition in the fertiliser business as it seeks to revamp the Nitrogen Chemicals of Zambia (NCZ) by awarding it big tenders to supply inputs under Farmer Input Support Programme (FISP).

But agriculture minister Robert Sichinga says the government's decision to buy agriculture inputs for this season's FISP, cutting out the private sector will save the country millions of dollars.

Commenting on strategic policy measures the government plans to undertake next year in the agricultural sector, Kabaghe, the former agriculture minister, said the government should be commended for focusing on some key drivers of the sector such as roads, irrigation and dip tanks but that the continued heavy spending on FISP and the Food Reserve Agency (FRA) was a concern.
"We have serious question marks with huge allocations going to only those two programmes. These programmes, according to our research, have shown that they have not produced the required results," he said.

"Productivity per hectare has remained constantly low - at two tonnes per hectare. The potential of the maize seed varieties produced by seed companies in this country is above eight tonnes per hectare."

Last Friday, finance minister Alexander Chikwanda proposed in the 2014 national budget to spend K500 million on FISP, while the strategic FRA would gobble about K1 billion.

"We would have loved a lot of money going into research and development because this is an area that is crucial for growth of the agriculture sector," Kabaghe said.

He further cautioned the government not to allow NCZ to cloud out the private sector in the fertiliser business.

The government, according to Chikwanda, plans to continue revamping the NCZ in 2014, extending its operations to produce urea.

"I know everyone now is very happy that NCZ is being recapitalised and they have already supplied 70,000 tonnes of D compound fertiliser to the government and the minister said that next year, they will also be producing urea. In the short run, it is a good thing to do but I can assure you that we should not continue to do that," he said. "All that is going to do is stifle competition."

Kabaghe said the past years had seen vibrant companies competing in the fertiliser business but these could collapse if all the contracts would be awarded to NCZ.

But Sichinga has defended government's move to eliminate private companies that imported fertilizers for resale to government.

The government this year plans to spend over US $1 billion in buying and distributing seeds and fertilizers to peasant farmers.

Sichinga said the government is subsidizing the inputs by 51 per cent while beneficiary farmers would pay 49 per cent of the K1, 070 which involved two bangs of basal dressing, another two for top dressing and a 10 kilogramme bag of seed.

"If you look at the cost, the tender that came in, they private suppliers were asking for a US $1, 000 per metric tonnes," he said. "But we are paying US $383 per metric tonne with Zambia paying for costs of the fertilizer from Saudi Arabia."

Meanwhile, Sichinga said the FISP was flawed in that it captured only 900, 000 poor farmers, leaving out 600, 000 eligible farmers.

He said effective next year, the flopped electronic voucher system would be replaced with electronic cards that carried biometrics for beneficiary farmers.

Sichinga revealed that the use of electronic voucher system which had been touted since 2011 failed to take off due to lack of computers and an operation centre.

"We have just completed creating the data base for the e-card for farmers," he said. "With this e-card which farmers will get, it will carry the value which government can send to beneficiary farmers. This e-card will have the number of the farmer, his or National Registration Card number and also a password."

Sichinga also said the FISP was supposed to cater for 1.5 million farmers and not the 900, 000 serviced currently.

"We have just finished our FISP census and according to our census, we just have under 1.5 million eligible farmers for FISP," he said.

"So, there is a 600, 000 farmers that we are not supporting because the amount of money we have is limited. So, that 241, 000 that was supposed to be on e-voucher, now, we have to put them on the revised FISP. From next year, it's just gonna be Farmer Input Support Programme which is electronically done."

And Sichinga said 50, 000 metric tonnes of the top dressing fertilizer was expected in the country this month via Nakonde from Dar es Salaam and distribution would start from the Northern parts of the country.

"My plan is that before the end of October all the fertilizer and seeds should be with the farmers but suffice to say it will be in time because it basal dressing fertilizer is all in the districts right now," said Sichinga in an interview.

"We expect to procure, in total, just under 100, 000 metric tonnes of top dressing while the entire D-Compound of slightly over 72, 000 will be produced from Nitrogen Chemicals of Zambia. We are almost finished with production of basal; as of last week, we produced 68, 000 metric tonnes and of that number, more than 50, 000 metric tonnes has already been dispatched to the districts."

Labels: CHANCE KABAGHE, DEBT, FISP, ROBERT SICHINGA

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posted by MrK @ 4:54 PM 0 Comments

Magande warns govt against unplanned expenditure
By Chiwoyu Sinyangwe and Gift Chanda
Wed 09 Oct. 2013, 14:01 CAT

NG'ANDU Magande says it is surprising that the government wants to shift from expansionary budget to constrained expenditure when a lot of infrastructure projects are still ongoing.

And ActionAid Zambia says revenue mobilisation next year should not only centre on raising taxes but sealing tax leakages in all economic sectors.

Last month, Secretary to the Cabinet Fredson Yamba revealed that next year's budget will focus on reducing government expenditure as a way of containing rising fiscal deficit, which has accelerated from targeted five per cent this year to 8.5 per cent of the gross domestic product.
Finance minister Alexander Chikwanda is this Friday expected to deliver the budget speech to the National Assembly.

Commenting on the upcoming presentation of the 2014 national budget, Magande, who is National Movement for Progress (NMP) president, said it was inevitable for the government to watch its many unplanned expenditures to contain the widening fiscal deficit.

"Just after being in power for two years, you are already constraining your budget," said Magande, one of the longest-serving finance ministers in Zambia.

"The first budget the PF presented, they said it was for Rupiah Banda; the second one was theirs. Now the third budget, they are talking about regressing… it is like we are going backwards."

Magande, who supported treasury plans to contain the widening public expenditure, said there was need to spell out how the constrained budget would not hurt key infrastructure programmes.

"This year's deficit can only be dealt with by reducing your borrowings next year," Magande said.

"If next year, they are restraining the budget, how are they going to finish all the road projects they have started? I accept what Mr Yamba said that we have to constrain the budget next year. But what is going to happen to these roads they have started? It means the projects have to be abandoned."

Magande said proper budget execution could not be achieved in the absence of proper planning.

"Don't be excited that because you can start a road, then that is an achievement," said Magande. "It's how and when we could complete a road."

And ActionAid said sealing all tax leakages should not just be in the mining sector, but in all the other growth sectors of the economy.
The charity organisation said that sealing tax loopholes had potential to improve the overall performance of all tax types and increase efficiency and equity in the tax system.

"Tax mobilisation is not just about copper rentals," Patrick Nshindano, an Economic Justice Project officer at ActionAid Zambia said.

"It is about ensuring effective tax collection," he said.

Nshindano said there were a number of pitfalls hampering the government's ability to mobilise revenue which needed to be addressed in next year's budget.

Citing tax avoidance and evasion by some multinational corporations, Nshindano said the government needed to tackle the vice to increase domestic revenue mobilisation.

He also said the government needed to harmonise company taxation.
Currently, corporate tax rates are sector-based and differ across sectors.

In its proposal to the budget, ActionAid has proposed that the government unify corporate rates towards 30 per cent to arrest revenue leakage through tax planning.

"An example is Zambia Sugar Company which, despite being both an agriculture and manufacturing company, has most of its expenditure deductions accounted for under manufacturing to avoid paying tax at 35 per cent," ActionAid stated.

The charity also advised the government to re-negotiate or cancel double taxation agreements with particular countries, especially those with the Swiss Confederation and the Republic of Ireland.

ActionAid said double taxation agreements allowed foreign-owned companies to choose countries where withholding tax is zero-rated.

Labels: ACTIONAID, DEBT, FREDSON YAMBA, NG'ANDU MAGANDE

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posted by MrK @ 7:17 PM 0 Comments

Borrowing for right capital expenditure is fine - Thornton
By Moses Kuwema
Wed 25 Sep. 2013, 14:00 CAT

BRITISH High Commissioner to Zambia James Thornton says major borrowing to fund the right capital expenditure is fine. And Engineering Institute of Zambia president Bernard Chiwala says there has to be a balance in terms of financing by debt or equity of domestic revenue.

Speaking when he featured on ZNBC's The Quest programme on Monday night, High Commissioner Thornton said major borrowing was fine as long as the capital expenditure helped the country to grow so as to provide the extra revenue which would enable the country to pay off its debt.

"Major borrowing in order to fund the right capital expenditure is fine. There are three different angles to this; you can raise revenue, you can borrow within the limits and you have got to ensure that your spending does not outstrip the revenue you raise. I hope the government has got all those in mind. So infrastructure is a very good way to go. You need power, you need roads, the railway, so you have to be careful to pick the right projects, I think," he said.

And High Commissioner Thornton said Zambia's debt and Gross Domestic Product ratio was still impressive, something he said was good.
The government and International Monetary Fund have projected the country's GDP growth this year at six per cent from the 7.1 per cent earlier projected.

And Lubansenshi Independent member of parliament Patrick Mucheleka says there is need to strengthen the aspect of domestic revenue mobilisation.

Meanwhile, Mucheleka said the ambitious social programmes that the PF government had embarked on would result in the country sliding into a serious debt trap.

And Chiwala, who is also permanent secretary in the Ministry of Works and Supply, said engineers were ready to support policy directions that the government was putting forward.

He said it was good that the funds that were borrowed through the use of the Eurobond went to infrastructure.

"We are suffering at the moment with power deficit and part of the money went towards the infrastructure so that we have power continuously so that mines and industries can operate. Part of it went to the roads. You need to open up the country so that you can take goods from one corner to the other part of the country. Tourism for example, the only place we know is Livingstone, but the Northern circuit needs to be opened up so that people can go there and see the attraction we have. It will require financing and the beauty of it is that it is not going for consumption. There will be a return that will come along the way so that must be supported and encouraged but it should be within the limit that we can afford continuously," Chiwala said.

During the same programme, Private Sector Development Association chairman Yusuf Dodia said it was unfortunate that President Michael Sata did not mention the issue of budget overrun and deficit in his speech to parliament last Friday.

Dodia said the budget overrun was a management issue and that he expected the President to fire some warning shots going into 2014.

Labels: BERNARD CHIWALA, DEBT, JAMES THORNTON

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posted by MrK @ 10:20 AM 0 Comments