Ministers oppose proposal for Parliament oversight over debt
By Mwala Kalaluka
Sunday August 03, 2008 [12:49]
TWO ministers in the
Public Finance Committee of the NCC on Friday opposed a proposal from the Jesuit Centre for Theological Reflection (JCTR) that Parliament must approve debt before it is contracted. JCTR Debt, Aid and Trade programme coordinator Muyatwa Sitali in his submission before the committee said
in view of the inadequate parliamentary control over the borrowing process, there was need for the new constitution to provide for the selection of a parliamentary committee to scrutinise debts.
Muyatwa, who was flanked by JCTR executive director Fr Pete Henriot, said this proposal was in tandem with the JCTR's proposed debt management bill.
"The bill proposes a broader and inclusive debt contraction process which is not only limited to the Minister of Finance but also provides the authority to Parliament to strengthen its oversight role in the contraction and management of debt," he said.
"The 'select committee' of Parliament could be either one which is already existing such as the Economic Affairs and Labour Committee, the Public Accounts Committee or the Estimates Committee or any other that may so be established for purposes of exercising oversight."
Muyatwa proposed that the select committee should analyse every loan to be borrowed in the ensuing financial year, together with the estimates of revenues and expenditure of the government.
"It is our considered view that the preparation of 'Debt Management Strategies' should be made more explicit and a directive of law," Sitali said.
He pointed out such interventions were necessary to cushion the country from getting into another debt trap.
But works and supply minister Kapembwa Simbao argued that borrowing was an unavoidable need.
He urged people to have confidence in the Minister of Finance over the loan contraction process.
Transport and communications minister Dora Siliya, who left the committee room before the issue could be put to 'rest', said Sitali's proposal would dilute the roles of the three wings of government.
She said Parliament was still privy to the debt contraction process because the Minister of Finance usually provided percentages during the budget presentation, as to how much of it would be funded from external sources.
Sitali maintained that it would be good if Parliament had an idea of what the government wanted to borrow.
Sitali said the JCTR's debt management strategy transcended political boundaries.
However, committee vice-chairperson Charles Milupi said the proposal was a progressive one and required attention, because the issue of debt was vexing.
"If you look at what is proposed here, it is not to diminish the powers of the Executive," said Milupi.
Labels: CHARLES MILUPI, DOMESTIC DEBT, DORA SILIYA, FR HENRIOT, JCTR, KAPEMBWA SIMBAO, MINISTERS, MUYATWA SITALI, PARLIAMENT, TRANSPARANCY
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IMF cautions Zambia over borrowing
By Joan Chirwa
Tuesday July 29, 2008 [04:00]
THE International Monetary Fund (IMF) has
cautioned Zambia and other developing countries against huge external borrowing amidst a boom in commodity prices. But finance and national planning minister Ng’andu Magande has assured that the government will not increase its current external debt but judiciously use resources gained from high copper prices to develop key infrastructure. Presenting an updated forecast of the World Economic Outlook 2008, IMF
economic counsellor and director of research, Simon Johnson urged Zambia and other developing countries to exercise caution in terms of the country’s fiscal positions in order to avoid being vulnerable.
Johnson said developing countries should keep in mind that while some commodity prices may remain high, it would be a mistake to rely on that in terms of the country’s fiscal position.
“We have emphasised, and we made this point in our Spring World Economic Outlook, that if the global economy starts to turn down as we expect, then at some point commodity prices would also come down,” Johnson said.
“It's hard to call at this moment, but we do urge caution in terms of countries' fiscal positions, for example, and the extent of their external borrowing, that they should keep in mind that while some commodity prices may remain high and some of them could even go higher, it would be a mistake to bet on that in terms of the fiscal position of a country. So you don't want make yourself vulnerable.”
Johnson however said the IMF thinks most African countries have remarkably managed the commodity boom.
“We think they've learned a lot of lessons from previous experiences. And, broadly speaking, they're doing a good job. But we are urging them to be careful, of course, about spending what may turn out to be a temporary windfall,” said Johnson.
But Magande said the government had no intentions of increasing external debt, assuring that the country would use finances gained from the new tax regime to develop key infrastructure.
“Government is already not borrowing and we are trying to use money we are getting from the boom in copper prices for infrastructure development such as roads, rail, energy and telecommunication.
We recently gave money to Zesco Limited for their rehabilitation programme so that we can resolve the current power shortages,” Magande said. “We have already made our position known as the government that we will not borrow and we stand by that. We appreciate what the report is saying and for acknowledging that most developing countries have managed the commodity boom properly.”
But Jesuit Centre for Theological Reflection (JCTR) coordinator for Debt, Aid and Trade Muyatwa Sitali said the government should live up to its assurance that it will not contract any debt this year.
“It is impressive for the minister (Magande) to mention that the government will not contract any external debt considering that we don’t yet have a legal framework that makes sure we borrow with parliamentary oversight and in a transparent manner,” Sitali said.
“This is the reason why as JCTR, we have been insisting on having a legal framework which would keep the government away from contracting unsustainable debt. We find it difficult to understand what could explain the time taken by the government to put in place the legal framework. We prepared a proposed Debt Management Bill which we submitted to the Ministry of Finance and National Planning but we haven’t been informed of what step government will take.”
Sitali also said advising Zambia to borrow for investments in the energy sector would take the country back to unsustainable debts in the absence of a legal framework on debt contraction.
“There have been policy advices that say Zambia should borrow for the enhancement of the energy sector but this is coming when we don’t have a legal framework on debt contraction,” said Sitali.
And IMF’s World Economic Outlook (WEO) 2008 states that rising energy and commodity prices have boosted inflationary pressure as well as growth slowdown, particularly in developing and emerging economies.
“In advanced economies, inflation pressures are likely to be countered by slowing demand and, with commodity prices projected to stabilise, the expected increase in inflation for 2008 is forecast to be reversed in 2009,” the IMF stated. “In emerging and developing countries, inflationary pressures are mounting faster, fueled by soaring commodity prices, above-trend growth, and accommodative macroeconomic policies.
Hence, inflation forecasts for these economies have been raised by more than 1.5 percentage points in both 2008 and 2009, to 9.1 per cent and 7.4 per cent, respectively, and the moderation in inflation in 2009 will depend on more assertive tightening of monetary conditions.”
Zambia’s inflation rose to 12.1 percentage points last month largely on account of rising costs of basic needs.
The Central Statistics Office (CSO) said of the total 12.1 per cent, food products accounted for 7.5 percentage points while non-food items in the consumer price index (CPI) accounted for a total of 4.6 percentage points.
Labels: GOVERNANCE, IMF, JCTR, MAGANDE, MUYATWA SITALI
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JCTR calls for utilisation of gains from debt cancellation
By Chibaula Silwamba
Wednesday January 23, 2008 [03:00]
THE Jesuit Centre for Theological Reflection (JCTR) has said this year’s national budget needs to take advantage of the gains from debt cancellation to enhance poverty reduction through implementation of policies that increase household productivity.
In an interview yesterday, JCTR debt, aid and trade co-ordinator Muyatwa Sitali said to increase household productivity, it was essential to create and support a highly productive and dynamic industrial base rather than concentrate on promoting consumption related development such as retails and chain stores.
“These narrowly improve the employment base but increase importers thereby affecting the balance of payment which is the ingredient to a ballooning external and domestic debt,” Sitali observed. “Opportunities for improving the industrial base range from new investments as well as innovative ways of improving quality and adding value to Zambia’s products which are often raw materials. This paves the way for better and efficient technologies which can be encouraged locally and learnt from other countries.”
Sitali said although foreign direct investment could potentially contribute to this objective, it should not substitute the role of the state to ensure that there was a favourable environment for investment especially local producers and investors.
He urged the government to provide incentives in this year’s budget whereby Zambians that want to invest in production sectors could be exempted from paying duty on imported equipment.
“Increased household productivity has the potential to contribute significantly to aggregate national income and even lead to the over seven per cent growth desirable for attaining the Millennium Development Goals (MDGs) in Zambia,” Sitali said.
Labels: HIPC, JCTR, MUYATWA SITALI
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‘State won’t borrow beyond K20 trillion’
By KASUBA MULENGA
GOVERNMENT says it has worked out a strategy to avoid falling into unsustainable debt following the country’s attainment of the Highly Indebted Poor Countries Initiative (HIPC) completion point in 2005.
Minister of Finance and National Planning, Ng’andu Magande, said yesterday that Government would ensure that it does not borrow beyond K20 trillion as a means of remaining within sustainable levels, especially that the country was generating significant revenue locally.
Mr Magande said this in Lusaka during a Zambia National Broadcasting Corporation live television programme sponsored by the Jesuit Centre for Theological Reflection (JCTR).
The discussion was on debt management, with a special focus on Zambia after the HIPC completion point.
“I want to assure the nation that Zambia will not get back into unsustainable debts because Government is getting a lot of revenue locally. We will only have debt within reasonable levels,” Mr Magande said.
This is amid concerns that after attaining the HIPC completion point, Zambia’s debt dropped to about US$502 million in July 2006 but sharply rose to US$1.5 billion by December the same year.
But the minister said after facing a heavy debt burden for a long time, Government would be careful with the way it borrowed money, and appealed to the public to entrust Government with such a responsibility.
Mr Magande said although under Cap 366, Part 10, of the Laws of Zambia, he had the authority to source loans for the country, he would ensure that the country did not contract loans beyond the K20 trillion ceiling.
He said if Government first allowed MPs to discuss the terms of acquiring loans from external sources, it would take too long to complete the process of getting the funds.
Mr Magande said there were technocrats competent to understand the nature or conditions attached to loans.
But Kabwata MP, Given Lubinda, said it was important that Zambians knew the terms of getting external loans through their representatives in Parliament.
Mr Lubinda, who is also chairperson of the Parliamentary Committee on Economic Affairs and Labour, said the country should enact a Budget law, to allow MPs to discuss the conditions attached to any loan before Government could access it.
He said since the current legislation did not provide for MPs to sue Government over loans which could have been obtained under dubious conditions, only a law could be effective to stop the State.
Mr Lubinda said as much as loans could be sourced for development programmes, it was important for the people to understand how they were sourced.
But Mr Magande said knowing where loans came from was insignificant because the main issue was development.
And of Jubilee Zambia/JCTR’s Muyatwa Sitali said although the country attained about 65 per cent debt cancellation, the solution to debt management had not yet been established.
Mr Sitali said there should be reforms to institutions and the legal framework on debt management in Zambia, as this was the only way to attain meaningful development.
He said the issue of MPs discussing conditions attached to loans before accessing them was paramount and should be enshrined in the legal framework regarding debt management.
And giving Zambia’s debt burden background, former President, Kenneth Kaunda, said when the country got independence in 1964, there were only 100 university graduates who included three medical doctors. He said copper prices later went down while international oil prices rose.
Dr Kaunda said because of this, his Government decided to borrow funds from the International Monetary Fund and World Bank to build schools, health institutions and other social infrastructure.
He said the two international financial lending institutions gave Government strict conditions on repayment but it negotiated to be paying in small amounts so that the country could use the rest on local development.
“But when we failed to follow their conditions, they came back hard on us with tricks. The world should remember this is a very unfair way of dealing with debt,” Dr Kaunda said.
Labels: DEBT, DOMESTIC DEBT, HIPC, JUBILEE ZAMBIA, MAGANDE, MUYATWA SITALI
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