(STICKY) Chikwanda describes advocates of windfall tax as lunatics
COMMENT - Is Guy Scott a lunatic? Is minister Robert Sichinga a lunatic? Is dr. Kaunda now a lunatic too? Is Andrew Sardanis a lunatic? (Also see here on Cho's blog: List of Prominent Zambians For A "Windfall Tax" On Mining). Because all the above advocated for the Windfall Tax before the election. Until the PF even start to collect all the taxes that are due even under the variable profit tax, and the dividends owed to ZCCM-IH, they have no right to call anyone who advocates for the highly effective windfall tax 'insane'. It seems to me more that the latest finance minister is a coward and just another shill for the mining industry. Has he been paid a little bribe so that the country can continue to be robbed for billions of dollars a year? How do 'donor countries' justify paying one cent of 'donor aid', which are their working and middle class and ordinary companies' taxes, when the government refuses to collect taxes from the mines, which are transnational corporations (Anglo-American De Beers, Glencore, First Quantum, Equinox, etc.)? Of course their own governments are captive of the TNCs, the IMF/WB and the trillionaires too. As a finance minister, you are there to serve the interests of the state, not the mines.UPDATE (23/03/2012, 15:05 GMT/CAT): (POST) Mines should pay more tax - Scott; (POST) Magande questions Chikwanda's windfall tax reaction
Chikwanda describes advocates of windfall tax as lunatics
By Gift Chanda
Thu 22 Mar. 2012, 13:00 CAT
FINANCE minister Alexander Chikwanda has described as "lunatics" those advocating for the reintroduction of the 25 per cent windfall tax on base metals. And Chikwanda says people are becoming increasingly vocal because they haven't seen any meaningful change since the PF ascended to power.
Meanwhile, visiting World Bank managing director Sri Mulyani says the current strong fight against corruption may slow down national budget implementation. Speaking when Mulyani paid a courtesy call on him yesterday, Chikwanda said people think the mining sector alone could solve the country's budget financing challenges.
"There is a misconception by external people who feel that we can get more money from the mines. Even internally, they have been many lunatics who think we should involve windfall tax…but the production costs in the mines are very high," Chikwanda said.
[Oh shut up, you corrupt shill. Copper prices were never higher. If these lying scumbags from the mines can't make a profit when copper is $8000 per tonne, they should hand them back to the State, because President Kaunda kept the mines running when copper was $2000 per tonne. - MrK]
"When you factor in things like the sea and inland costs of exporting and even importing, by the time you get to the market the transport factor alone, especially the inland component will push you to something like US $450 to US $500 per tonne.
[That's a pimple on a donkey's ass, when prices are $8000 per tonne. If 'costs are too high' at $8000/tonne, then they should give the mines back to the state. - MrK]
So that is why we have involved the royalty tax but of course we have to be very prudent. Mining has a long gestation and we don't want to tax the mine out of existence.
[They never worry about taxing the middle class out of existence. Because right now, the Zambian middle class is paying more taxes than the mines. Again, if the mines can't make a profit at $8000 per tonne, they have no business owning them. Give them back to the state. - MrK]
So our taxation are quite balanced at the moment. In fact there are a lot of complaints from the mines on the government's hike in the royalty tax from three per cent to six per cent but we need to strike a balance."
Chikwanda said the country would need to use economic diversification to address the country's budget financing constraints.
[Which you can't finance without going into debt, if you don't effectively tax the mines with a windfall tax. All government projects are pipedreams, if they refuse to collect the taxes to pay for them. - MrK]
He, however, said the government would need to strengthen extension services and shift attention on maize production alone to achieve economic diversification.
"The revenue will come from diversification because if areas like agriculture can deliver then we can be there…we could channel those local resources we put in one crop into extension services and that would improve the productivity of small-scale farmers because if the small-scale farmers do things correctly and raise the agronomy, their production would increase," Chikwanda said.
[Timid crap. - MrK]
"But this also depends on zoning the activities. For example we have been promoting maize production in areas where the crop is not sustainable this has to be addressed…We need to do sensible things and grow things in areas that they can be grown more effectively."
He admitted that the PF was under pressure from Zambians to deliver on its promises.
"People are becoming increasingly vocal because they haven't seen any meaningful change so we are under pressure," said Chikwanda.
"The civil service is a bit slow…because levels of motivation are very low. But the commitments are quiet there, it is just a question of how you exercise the leadership."
But Mulyani cautioned the government on its strong fight against corruption.
She said national budget implementation, which was going to be key in the new administration's fulfilling of its campaign promises and sustaining the support of many Zambians, could suffer.
"Implementation of your budget is going to be very important especially that you are a new government. When I was finance minister I tried to address the issue of corruption but then it caused a slowdown in budget implementation because people were so scared of making decisions. They don't know how to get the trust of the new administration but at the same time have the confidence to execute the budget. So I suspect you are faced with a similar situation," she said.
Mulyani urged the government to accelerate the implementation of the budget, explaining that people would not be patient to forever wait for tangible actions to be made.
"The people expect the government to deliver…you have explained extensively what needs to be done, but I think the challenge still remains on how many of all those good ideas or frame works or concepts are you delivering and implementing? Your government was just elected now the people want the government to deliver what they think will really make real progress on the ground," said Mulyani.
********************************
UPDATE 07/01/2018 - This article is no longer available from The Post and wasn't scanned by the Web Archive. The interviews are of former Minister Magande (MMD),and Dr. Guy Scott (PF).
http://www.postzambia.com/post-read_article.php?articleId=26109
Magande questions Chikwanda's windfall tax reaction
By Gift Chanda
Fri 23 Mar. 2012, 13:00 CAT
IT is ironic for finance minister Alexander Chikwanda to call his colleagues in the Patriotic Front lunatics for advocating the reintroduction of 25 per cent windfall tax on base metals, says Ng'andu Magande.
And Magande, the longest serving finance minister in the MMD government, has challenged the PF government to give a proper policy direction for the country.
In an interview, Magande, who is National Movement for Progress president, said it is surprising that Chikwanda could label windfall tax advocates ‘lunatics' when the PF was propped into power by promises of reintroducing that tax.
"It would be interesting to get a quotation of what President Sata said in Mongu or what he said in Livingstone or Kalulushi and say while the Minister of Finance is saying the people advocating for windfall tax are lunatics, his own party when they had a big mass rally at Mandevu. This is what either Mr Vice-President Scott said or what Mr Shamenda said or what Mr Kambwili said," he said.
"Mr Chikwanda never addressed a single mass rally so is he calling his friends that were saying ‘we should reintroduce windfall tax' lunatics?"
Magande said some PF officials continued to advocate windfall taxes even after the party won last year's elections.
"The former Minister of Mines Hon Simuusa has been going around and has been telling the people, even in Parliament, they issued a statement that they are going to reintroduce a windfall tax, so is he Chikwanda calling his own colleagues in PF lunatics?" Magande questioned.
"I am the one who introduced windfall tax in 2008 and I am sure everyone knew my position on this issue."
He said it was ironic for Chikwanda to start calling names people advocating windfall tax when his party pressured late president Levy Mwanawasa to introduce the windfall tax.
"These people were actually pushing president Mwanawasa and the minister of finance then to introduce windfall tax. Even in campaigns, they campaigned on the basis of reintroducing this tax and people voted for them," he said.
"I would really say that is not very civil language to call other people lunatics. These are public things which you should allow other people to debate."
And Magande said people were mixed up with the PF's policy direction.
"We don't know which direction they want to take the country," he said."Let them come out so that all this issue of the secretary general for PF saying ministers don't seem to be coordinated can be over. Mr Kabimba said ministers are not singing from the same hymn book...we the people who are not in government are surprised. Why shouldn't they be saying the same things if they have the same manifesto, hold same cabinet meetings? If the government continues to be divided as they are now to an extent that the secretary general of PF himself says there is discord in the government, we the people will not be impressed, we are actually not impressed. We will also lose hope for the future and we will also lose sense in what they are doing."
He said lack of proper policy direction led to the global rating agency, Fitch, downgrading Zambia's economic outlook.
Magande said the PF should start backing its rhetoric with action.
"This time we should reduce the question of talking about the PF party. The party won the elections, now for me I am interested to know what the government is doing," he said.
"We want the government, the President, ministers to talk about civil servants implanting the vision which is there for the common good of all Zambians but now we are hearing about PF, PF, PF. PF won the elections..."
He urged President Sata to address the nation's policy direction.
"President has not issued any statement to give the direction of the nation.
He has never held a press conference to give us the vision of his party, the vision of his government. So he is keeping us in the dark," he said.
"The President went to Bostwana, came back yesterday what did we see in the papers, it was more about what happened in Lusaka - swearing in people but what did he go for in Bostwana because you can't go all the way to Bostwana to go and open a school and give a donation of US$10, 000. That can't be the purpose of his state visit. So by not telling us, they are saying ‘don't kubeba' so we are in the dark. So we have to use friends to tell us what they went to discuss."
He said even investors were losing confidence in the country's economy.
"Investors are keeping the dollars because they are saying perhaps the kwacha is going to depreciate again. It is not just foreigners who are hesitant, even the locals are hesitant, they want to keep the dollars. This is all caused by lack of a proper direction, a vision and economic plan for the country," said Magande.
http://www.postzambia.com/post-read_article.php?articleId=26120
Mines should pay more tax - Scott
By Mwala Kalaluka
Fri 23 Mar. 2012, 13:00 CAT
INVESTORS should pay more tax and they should be more tax-compliant even under the existing legislation, says Vice-President Guy Scott.
And natural resources, land and environmental protection minister Wylbur Simuusa says the PF manifesto already contains a mineral royalty tax-sharing mechanism.
Vice-President Scott made the remark whilst contributing to debate on a motion moved by Solwezi Central MMD member of parliament Lucky Mulusa, urging the government to establish a mineral royalty tax-sharing mechanism.
Mulusa's motion, which was ultimately passed by the House, was premised on the delayed implementation of section 136 of the mines and minerals development Act, enacted on April 1, 2008, concerning the sharing of mineral royalty revenue.
"We have taken the point that noboby should be able to suffer for being close to these natural resources," Vice-President Scott said.
"So we can't actually back your motion but we will take note of it."
Mpongwe MMD member of parliament Gabriel Namulambe said the local people of the Copperbelt had not benefited from the area's mineral wealth.
Namulambe lamented that because it had taken time to implement the mineral royalty-sharing mechanism, the Copperbelt, which was deemed as one of the developed areas of the country, was actually one of the poorest.
"We the real people Lambas of the Copperbelt are very poor," said Namulambe.
"What sin have we committed that when we are supposed to share, we are not considered?"
Kalomo UPND member of parliament Request Muntanga said it was a pity that the former MMD government failed to implement the mineral royalty-sharing mechanism.
"I sometimes wonder what happens to my friends when they shift from here opposition to there government. When it comes to fighting for the rights of the people, they forget easily," said Muntanga.
"We will remind them that it is important that they don't abdicate on this responsibility."
And Simuusa said that the motion was pushing an open door.
"The motion is a sermon or preaching to the converted," Simuusa said. "When we were in opposition we were indeed very passionate about this issue. We had a position."
Simuusa said whilst in opposition the PF was alive to the fact that a mineral royalty-sharing mechanism was necessary for the nation to share its mineral wealth equally.
"It's very interesting that last time this motion was shot down by that party MMD when they were in government. This motion actually is in line with our party manifesto," he said.
"We are going to implement this...We are in the process of revising the mines and minerals Act." Mulusa, in winding up the debate, said Zambians were listening attentively to PF leaders' confused response to the motion.
"At the beginning of the debate, I had a very clear mind. Now, my mind is in confusion. I don't know what message I will give to my people," said Mulusa.
"Mining areas are patients so give them some bit of medicine so that they come to a state of health where everyone is."
Labels: CORRUPTION, NATIONALISATION, WINDFALL TAX
posted by MrK @ 6:22 PM
26 Comments:
This is what VP Guy Scott said about the Windfall Tax, before the PF ascended to government:
One of the attractions of the windfall tax to many commentators is its apparent objectivity. You take the amount of copper produced, multiply by the LME price in excess of the various “trigger points”, and alleluia, you have Zambia’s share of the action. By contrast, the system currently in force is heavily dependent upon taxing computed profits, and many people suspect that profits are less than objective. There is too much fudge-factor: non-transparent “hedging”; losses carried forward; so-called corporate responsibility expenditure; these and those allowances; transfer pricing; negotiated exemptions.
Let me emphasise that, viewed purely as a mathematical formula, the present tax regime, if applied objectively, would yield about the same revenue as was targeted by the windfall tax (i.e. 40 per cent plus of genuine profit). So there is no real argument about targets. It is the ability and will of the Zambian authorities to collect all of it – i.e. to hit the objective level - that is of concern to those of us who know our country. And after all, if countries that enjoy the advantages of sophisticated administrative machinery such as the UK can suffer from corporate evasion of profits tax, then how can we to be sure we can collect all that is due to us?
This is what Minister Robert Sichinga said, in the article Windfall Tax Imperative, in the Lusaka Times:
Policy Consultant Bob Sichinga says it is imperative that the new government re-introduces windfall tax so that all Zambians benefit from the wealth in the mining sector.
Dr. Kenneth Kaunda said: ""Free education is not possible without you (the investors) paying tax, you are working so hard...without you it is not possible to provide free education," Dr Kaunda told Mr Janakaraj and other senior management staff during a briefing."
On both Andrew Sardanis and now Minister Robert Sichinga's statement on the need for the Windfall Tax:
Andrew Sardanis has described the government's refusal to reinstate the windfall tax regime in the mining sector as an injustice to the country. And economic consultant Bob Sichinga has advised opposition political parties to make the issue of restoring windfall tax a campaign issue in next year's general elections.
And Sichinga, who has described President Rupiah Banda and Dr Musokotwane as unpatriotic for opposing the reintroduction of windfall tax, has charged that despite increasing pleas for maximising revenue collections from the mining sector, the government has continued to be adamant and irresponsible.
He said it was in this vein that campaigning on the platform of increasing tax collections from the mining sector would determine how serious the opposition political parties were to the governance of this country.
The mining sector which contributes about 70 per cent of the foreign exchange earnings and about 11.2 per cent of the country's gross domestic product only accounts for just over one per cent of the revenue collections by the Treasury.
"I am suggesting that if political parties were serious, they should make this a campaign issue," Sichinga said.
(THE POST) CSOs insist on 25% windfall tax
By Gift Chanda
Tue 27 Mar. 2012, 12:59 CAT
From Chola Mukanga's blog, Zambian Economist:
New Mining Taxes?
Finance Minister Alexander Chikwanda recently signalled that Government is considering introducing new "tax measures" in mining :
"...We will introduce measures and relook at the tax system in the mining sector. Our mining sector has not contributed much compared to the rest of the region. So we want to engage local experts and ensure we have the statistics on mineral production and exports, and then we will find modalities to effect new tax measures to increase revenue collection..."
I commend Mr Chikwanda for his honesty that we are losing out. As well as his latest signal that change is on the way. Two additional observations on his statement.
First, the suggestion is interesting - but remains vague. What are these measures? We need details not merely promises of more study. It is not theoretical physics. These are straightforward issues. The obvious option is increasing revenue based taxes e.g windfall taxation or raising mineral royalties perhaps to 10%. Profit taxes do not work. Alternatively explore an infrastructure based tax that can be ring fenced to be spent in mining areas - that would be a win-win proposal for everyone. And it would ease pressure on mining companies for Corporate Social Responsibility projects. Which are mere bribes against citizens demanding higher taxes and better pay.
Secondly, any reforms must be done differently. I feel we are missing the basic point. The problem with our mining policies is that they are party political policies, not policies of the Zambian people. Mr Chikwanda must remember that to have good mining policies, it is not just about changing taxes or laws, it is how they are changed. Policies forced by PF without a Green Paper and public consultation will do nothing to build a lasting environment for growth because it will have no full buy-in of all Zambians. Lack of consultation and unilateralism is hurting our country in many areas.
We talk about "one Zambia, one nation", but in my view right now there's nothing "one nation", as far as mining taxation policy is concerned because successive governments have treated it as personal to order without people participation. As long as that continues every government that comes along will constantly alter its mining taxation policies because we people ownership. We need a Zambian solution, not a PF or NAREP or MMD solution. GRZ and investors have to realise it is in everyone's long term interests to push for transparency within a publicly agreed framework. Anything else is not sustainable. The approach should be consultative and transparent. Only that will deliver stability in mining policies and facilitate long term investment.
The next step therefore is for GRZ to set out a comprehensive national policy on mining. And consult with the people for a good period. Let us all comment and debate on it. And then let it be implemented after parliamentary scrutiny - and let it stand the test of time. Mining is too important to be left to the care of few individuals no matter how smart or well intentioned our politicians may be. It is a national issue.
This is what happened to inflation in Zambia in 2015.
Inflation chart from Bloomberg Magazine.
(THE MAST/THE POST) Zambia’s debt a time bomb, warns Mumba
by Staff Reporter
28th July 2017
NEVERS Mumba has revealed what he terms Zambia’s hidden debt crisis, which he says is a staggering US$30.4 billion mainly accumulated from 2011 to date.
On June 21, finance minister Felix Mutati, in a ministerial statement in Parliament, said Zambia’s foreign debt stock stood at US$17.2bn, a figure he corrected to US$7.2bn following much debate.
Mumba, the MMD president and former Republican vice-president, stated that considering that there is much confusion among Zambians on what the correct debt position was, his team conducted a research and concluded that the figure of $7.2 billion that Mutati gave “is simply not true”.
Based on evidence gathered from a variety of sources, we have found that the true figure appears to be at least four times larger than stated. Our preliminary figures, based on information in the public domain, show that at a minimum, the true debt position is about $33 billion,
Mumba stated.
“In 2011 when the Patriotic Front government took office, Zambia’s external debt stood at $3.5 billion (15 per cent of GDP). Using the government’s own figures, it has ballooned to $7.2 billion (34 per cent of an estimated $21 billion GDP) in 2017 and the year is not yet over. But the World Bank as of 2015 put the debt at $8.7 billion (by 2017 it is certainly around $10 billion). Using our computed figure of $33 billion, it is 157 per cent of GDP – 40 per cent is the government’s own acceptable threshold.”
He stated that his team’s computation did not include other loans for 2017 still in negotiations such as the Lusaka-Ndola dual carriageway, which would cost not less than $500 million and further does not factor in local debt (estimated at $4 billion) or arrears owed to contractors ($1.7 billion).
“We have also not factored in an estimate of unknown loans. We estimate that the grand total of all debts is anything from $35 billion to $40 billion,” Mumba stated.
He stated that to make his research more complete, his team also took into account debt servicing from 2011 to 2015 based on data from the World Bank, and added own estimates for debt servicing for 2016 and 2017.
“Also of note is the fact that the government has this year requested for an additional $8 billion from China to fund infrastructure development. This shall make the debt position far worse than anything imaginable for Zambia,” Mumba feared.
What is clear from all the information available is that Zambia is sitting on a massive debt time bomb that shall explode in a very big way within the next 5 to 10 years. Based on projections of current economic growth rates, Zambia will not manage to pay off those debts in a sustainable way. A sovereign debt default and significant credit rating downgrade is a very real possibility.
He stated that his team does not claim perfection in its research and there was a chance that there could be gaps in the information.
We therefore call upon Mr Mutati to issue another ministerial statement and shed light on this matter with the true debt position because it appears the Zambian government is being economical with the truth. Zambians need to know the real debt position so that they can anticipate what is coming ahead of us economically, stated Mumba.
“The IMF is already in negotiations with the government for a $1.6bn bailout and they also need to know the truth, the whole truth and nothing but the truth in order to determine how much they can lend you because they need to know our capacity to repay.”
CONTINUED...
Below is the list of major loans contracted between 2011 and 2017
Kenneth Kaunda International Airport: $360 million (2014)
Poverty reduction projects: $13.5 billion (2012)
Poverty reduction programmes: $6.7 billion (2011)
750MW Kafue Gorge Lower Power Plant: $1.7 billion (2015)
360MW Kariba North Bank Power Plant Expansion: $430 million (2014)
Lusaka L400 roads: $300 million (2013)
Copperbelt International Airport (Ndola): $400 million (2017)
Lusaka de-congestion: $286 million (2017)
Communication towers: $280 million (2017)
Copperbelt C400 roads: $418 million (2015)
Chipata-Serenje railway line: $2.3 billion (2017)
Mongu-Kalabo road: $287 million (2011)
2,000 military houses: $157 million (2017)
Mansa-Luwingu road: $242 million (2012)
Water and sanitation programme: $135 million (2016)
Mbala-Nakonde road: $180 million (2011)
Lusaka sanitation project: $130 million (2015)
Kafubu water and sanitation project: $104 million (2014)
National Heroes Stadium: $94 million (2011)
Levy Mwanawasa Hospital expansion: $90 million (2015)
Kafulafuta Dam water project: $449 million (2017)
Housing project for security wings: $275 million (2015)
International Development Assistance programme: $600 million (2017)
Rural roads project (World Bank): $200 million (2017)
Environmental Remediation and Agribusiness Development: $106 million (2016)
Miscellaneous small loans: $300 million (estimate)
Debt position of previous government up to 2011: $3.5 billion
TOTAL: $33.5 billion
Annual External Debt Servicing
2011: $229.6 million
2012: $230.1 million
2013: $325.9 million
2014: $396.0 million
2015: $507.3 million
2016: $660.0 million (estimate)
2017: $800.0 million (estimate)
TOTAL: $3.1 billion
ESTIMATED NET DEBT: $30.4 billion (2017)
(THE MAST) Zambia’s public debt at high risk of distress – IMF
By Staff Reporter on December 5, 2017
THE International Monetary Fund (IMF) says Zambia’s public debt has been rising at unsustainable levels and is now at high risk of distress.
Meanwhile, the IMF has described its relationship with Zambia as a saga.
According to IMF, projections show that the country’s debt levels could reach 90 per cent of GDP in 2021 in a shock scenario as the government’s appetite for borrowing for infrastructure development continues.
The Bretton Wood institution announced last week the halting of bailout talks with Zambia owing to the huge debt the government has and intends to contract for its infrastructure projects, with a budgeted amount of almost a billion dollars in the 2018 national budget – almost the amount needed for the bailout package.
Making a presentation at the IMF sub-Sahara Regional Economic Outlook meeting in Lusaka yesterday, IMF country director Dr Alfredo Baldini also disclosed that Zambia’s interest payments on the accumulated debts now accounted for 22 per cent of government revenues.
“The growth of the economy in Sub-Sahara Africa has been decreasing from six to seven per cent to three to four per cent with an exclusion of South Africa and Nigeria because these are the two biggest economies of the region. Zambia’s public debt has been rising on unsustainable pace and now there is a big risk of debt distress in Zambia which has been driven by the large fiscal deficits. Zambia’s public debt is much higher than the rest of the countries in the region and its economic recovery is growing at a very lower pace which is very worrying,” Dr Baldini said according to statements issued after the meeting.
Continued 1...
“This is diverting resources from essential social sectors…The shock scenario [for Zambia] reflects a nearly full blown crisis similar to the one experienced back in 2015 when the REER (Real Effect Exchange Rate) exchange rate depreciated by 30 percent, copper prices fell by 20 percent, and growth slowed down from nearly 5 percent in 2014 to 2.9 percent in 2015. The shock scenario is less severe in terms as the REER depreciates by 15 percent and copper prices are projected to drop by 15 percent close to the 20 percent drop in 2015. The pass-through from the exchange rate depreciation to inflation in 2015 was large with inflation jumping from less than 7 percent in May 2017 to 21 percent in December 2017. Against this background, real growth is projected to fall to around 3 percent compared to 4.5
percent currently in the baseline reflecting the impact on consumption.”
He also noted that debts had risen throughout the region, with Zambia topping the list.
“Debt stocks have risen throughout the region in the past three years. Median public sector debt in sub-Saharan Africa rose from 34 percent of GDP in 2013 to 48 percent in 2016. Debt accumulation has been particularly high in oil-exporting countries, but debt-to-GDP ratios have risen even in countries that have enjoyed consistently high growth rates, the non-resource-intensive countries,” Dr Baldini said.
“What were the main drivers behind this rapid debt accumulation? In oil-exporting countries, public debt has increased, on average, by more than eight per cent of GDP per year during 2014–16. This reflects large primary deficits, a growing interest bill and balance sheet effects associated with exchange rate depreciation, against the backdrop of low (and at times negative) economic growth. In the rest of the region, the debt-to-GDP ratio has been increasing at an average rate of about 5 percent of GDP per year. The main drivers have been large primary deficits and valuation effects associated with exchange rate depreciation. In addition, in several countries, debt has increased due to a variety of below-the-line operations, including the buildup of arrears, adjustments for incomplete recording of treasury transactions, and migration of liabilities incurred by state owned enterprises onto the general government account.”
He said as a consequence of the rapid debt buildup, debt servicing costs had risen sharply.
“The median debt service-to-revenue ratio among sub-Saharan Africa countries increased from five percent in 2013 to nine percent in 2016 and is expected to reach nearly 10 per cent in 2017. In oil-exporting countries, the median debt service-to-revenue ratio more than tripled during 2013–16 (from five percent to about 17 per cent) and in 2017, is expected to exceed 25
percent,” Dr Baldini said.
Continued 2...
On commodity prices, he wondered what would drive sub-Saharan Africa’s growth in the coming years as prices of their key resources were expected to stay low and has instead advised countries to look to diversification.
“With commodity prices expected to stay low for long, and an overall weak growth
momentum, the question is what will drive growth in sub-Saharan Africa in the years to come? For some countries, economic diversification offers a path to growth. While sub-Saharan Africa has achieved a period of strong growth, structural transformation has been slower than in other regions.
This aggregate picture masks the significant progress achieved in the region’s noncommodity exporters. Some of these countries have achieved diversification at a similar pace to global peers. So we see there are still large potential gains from further economic diversification,” Dr Baldini said.
“Commodity prices, especially oil and iron ore (both very important for sub-Saharan Africa), remain well below their 2013 peaks, but have rebounded from last year’s troughs. Similarly for Copper the main export for Zambia – In the first half of 2017 there were sizable drops in the prices of agricultural raw materials, including cocoa, though some items like coffee and tea have increased.”
On human development, he said poverty remained high despite some improvements in human development and urged the enhancement of living standards.
“Improvements in human development partly reflect advances in health and education. For example, maternal and infant mortality have halved since 1990.
Despite this progress, there is no scope for complacency. Poverty remains pervasive and living standards need to improve further,” Dr Baldini said.
On Zambia’s relationship with the IMF, the country representative said it was almost a saga.
He expressed worry over the government’s ambitious borrowing plans, a reason that the IMF has suspended bailout talks with the country.
“The relationship between IMF and the [Zambian] authorities is almost a saga now. It’s important to keep the background very clear that surely, the IMF has been engaging with the authorities over the last year and particularly after the elections. So we did allow for good work to be done by putting the details together but then both of us we realised that the ambitious borrowing policy of government was inconsistent, we think that they need to take that trajectory to a moderate level to basically pave way for the possible fiscal consolidation and on that note, what is being done now is to ask the authorities to come back now with a revised plan,” Dr Baldini said.
Continued 3...
“You need to reduce on borrowing because as it is now, the levels of debt are very high and that is actually scary and worrying for the Fund because there is a lot that this country has to pay back. So unfortunately, we are not there yet, we haven’t agreed on anything. Government needs to refocus and going forward, we are very much interested in listening. We know that the Minister of Finance has been constantly saying that there is no more concessional borrowing but particularly, we want to see the implementation of the legislative process that government and the Ministry of Finance is announcing about the loans and guarantees to be enacted.”
Finance permanent secretary Mukuli Chikuba, who attended the event, said the government had come up with a number of measures to ensure that debt distress was dealt with.
“As a country, we have had a number of challenges which we faced in the past years and these challenges have been bordered on some external imbalances that came up and Zambia’s case was actually worsened by the drought that caused a bit of difficulties in terms of food and that’s why you see all those dips about Zambia because they were further exaggerated by a number of vulnerabilities. So in terms of boosting the economic buffers, government has come up with the economic stablisation and growth programme which is the basis upon which we have also been engaging with the IMF and other cooperating partners,” said Chikuba.
Zambia Institute for Policy Analysis and Research (ZIPAR) research fellow Shebo Nalishebo wondered what the problem was with the government to maintain high debt levels.
“At the moment, the wage bill increased from about 38 per cent of domestic revenues in 2014…and it went up to 52 per cent but it is been going down a little bit and now it is around 48 per cent,” said Nalishebo. “And so you really wonder what the problem is or the main sources of pressure is in public finances. Internationally or within the COMESA region, it is advised that we need to keep our wage bill around 35 per cent of the domestic revenues. So are still quite a long way in doing this.”
No amount of economic disaster can stop neoliberals from giving economic advice.
Now why was it lunacy, to collect dividends from the mines, instead of getting into debt by taking out Eurobonds? Did the mines grow wonderfully? What is or has been the benefit of this policy exactly?
https://www.lusakatimes.com/2018/01/07/compelling-need-put-zambian-politics-economy-context/
(LUSAKATIMES) A Compelling need to put Zambian Politics and the Economy into Context
January 7, 2018
https://www.lusakatimes.com/2018/02/17/stalling-imf-arrangement-no-effect-zambias-growth-strategy-amos-chanda/#comment-2366393
(LUSAKATIMES) Stalling IMF arrangement has no effect on Zambia’s growth strategy-Amos Chanda
February 17, 20186240 views
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Special Assistant to President Lungu for Press and Public Relations Amos Chanda says Government knows what is best for Zambia as outlined by the bold austerity measures that President Lungu his government have been implementing.
“The Zambian government, President Lungu and honorable Mwanakatwe, working together as Cabinet know that what is best for Zambia and is what they have put across since November 26 when the President addressed the nation and outlined austerity measures.”
Speaking when he addressed the media earlier today, Mr Chanda charged that government blueprint on sustainable development is yielding positive results from from significant budget control and expenditure.
“…That program has been ongoing and it is yielding results, there is a significant control of expenditure, there is a string adherence to budget credibility and principles. The Zambian government does not need an outsider to tell us that we must remove subsidies, we did remove them without any problem. There is no worry in government whatsoever about the status of the IMF program,” explained Mr Chanda.
He emphasised that government is committed to working with credible programs that speak to the needs of the Zambian people.
Meanwhile, Mr Chanda revealed that the new Finance Minister Mrs Margaret Mwanakatwe will give policy direction outlining the control measures with regards to the Auditor General’s report, realignment and restructuring of debt with the Chinese government and the Chinese contractors , and the position of the IMF, Zambia negotiations with regards to the balance of payments support program.
“…But I know she will say the IMF negotiations with Zambia will have to be constructed on the basis of what Zambia thinks is right for the country. He added that whatever program that will be be agreed upon will be pro poor with strong emphasis on social sectors and social cash transfer program, health, sanitation and education.
“..the government does recognize that fiscal consolidation, realignment of the debt profile and planning for the debt repayment, especially when the bonds are due, as matters that will be of priority,” he said.
https://www.lusakatimes.com/2018/02/17/stalling-imf-arrangement-no-effect-zambias-growth-strategy-amos-chanda/#comment-2366393
(LUSAKATIMES) Stalling IMF arrangement has no effect on Zambia’s growth strategy-Amos Chanda
February 17, 20186240 views
Amos Chanda
Special Assistant to President Lungu for Press and Public Relations Amos Chanda says Government knows what is best for Zambia as outlined by the bold austerity measures that President Lungu his government have been implementing.
“The Zambian government, President Lungu and honorable Mwanakatwe, working together as Cabinet know that what is best for Zambia and is what they have put across since November 26 when the President addressed the nation and outlined austerity measures.”
Speaking when he addressed the media earlier today, Mr Chanda charged that government blueprint on sustainable development is yielding positive results from from significant budget control and expenditure.
“…That program has been ongoing and it is yielding results, there is a significant control of expenditure, there is a string adherence to budget credibility and principles. The Zambian government does not need an outsider to tell us that we must remove subsidies, we did remove them without any problem. There is no worry in government whatsoever about the status of the IMF program,” explained Mr Chanda.
He emphasised that government is committed to working with credible programs that speak to the needs of the Zambian people.
Continued...
Meanwhile, Mr Chanda revealed that the new Finance Minister Mrs Margaret Mwanakatwe will give policy direction outlining the control measures with regards to the Auditor General’s report, realignment and restructuring of debt with the Chinese government and the Chinese contractors , and the position of the IMF, Zambia negotiations with regards to the balance of payments support program.
“…But I know she will say the IMF negotiations with Zambia will have to be constructed on the basis of what Zambia thinks is right for the country. He added that whatever program that will be be agreed upon will be pro poor with strong emphasis on social sectors and social cash transfer program, health, sanitation and education.
“..the government does recognize that fiscal consolidation, realignment of the debt profile and planning for the debt repayment, especially when the bonds are due, as matters that will be of priority,” he said.
(OPEN ZAMBIA) Eurobonds Have Pushed Zambia To Breaking Point
Respected Former Bank of Zambia Governor Caleb Fundanga has raised serious concerns over the country’s worsening debt situation.
In his latest paper titled, “Fit for Purpose? An Analysis of Zambia’s Medium-Term Debt Management Strategy, Dr Fundanga observed the three Eurobonds have completely reversed the country’s almost debt free status attained before 2011.
Dr Fundanga noted that Zambia was one of the countries that benefitted from the Highly Indebted Poor Countries (HIPC) and Multilateral Debt Relief (MDR) Initiatives noting that these initiatives left the country almost debt free.
He however observed that in recent years, the Zambian debt situation has completely reversed.
Dr Fundanga stated that with a debt stock of 18.9 percent of GDP in 2011 Zambia’s debt stock grew to 56.3 percent by 2015.
“This very rapid increase has occurred since 2012 due to the issuance of Eurobonds; US$750 million in 2012, US$1 billion in 2014 and US1.25 billion in 2015. The rapid increase in debt has translated into huge annual debt service payments; from US$34.14 million in 2011 to US$484 million in 2016,” he wrote.
Dr Fundanga observed that the domestic debt situation has been equally bad.
“This debt, mainly contracted through issuance of Treasury Bills and Bonds, has grown from ZMK11 billion in 2011 to ZMK33 billion in 2015 with resultant composite yield rates for Bonds rising from 15 percent in 2011 to 25 percent in 2015 whilst Treasury Bills rose from 11 per cent in 2011 to 24 per cent in 2015. When domestic arrears are added to this, domestic debt stock in 2016 stood at ZMK 51.8 billion – with arrears representing 36 per cent of domestic debt.”
The Former Central Bank Chief stated that the PF government has been using debt to drive growth.
He however noted that redemption of any debt works much better if the proceeds of the borrowed money are invested in productive sectors of the economy.
(LUSAKA TIMES) Zambia facing risk of economic shutdown-Simumba
April 24, 2018
In a series of tweets, Mr. Simumba said even the official reports from the Ministry of Finance on the economy is full of inconsistencies.
“Looking through the 2017 Annual Economic Report, it seems Government is now borrowing from other banks to pay the 15% upfront counterpart funding that China requires when it provides loans. Three Loans amounting to $145 million have been taken by GRZ in 2017 to pay for the 15% counterpart funding required by China and India for the following projects: Star Times ($41 million), Industrial and Commercial Bank of China for the Ndola Airport Project ($59.5 million) and for the recently launched Indian EXIM Bank financed Lusaka de-congestion project from Standard Chartered Bank at $44.9 million. This is ‘Borrowing upon borrowing or borrowing to borrow’.
Mr. Simumba charged that this is very irresponsible because the country is now borrowing on borrowing and further inflating the costs of principal loan repayment and interest servicing payments.
(LUSAKA TIMES) Zambia facing risk of economic shutdown-Simumba
April 24, 201808 views
International Trade and Business Consultant Trevor Simumba has warned that Zambia is at great risk of an economic shutdown if definite actions are not taken by the Government.
And Mr. Simumba says the Ministry of Finance should stop being defensive about Zambia’s growing debt
Mr. Simumba has also charged that Ministers and other technocrats are not telling President Edgar Lungu the truth regarding the state of the country’s economy.
In a series of tweets, Mr. Simumba said even the official reports from the Ministry of Finance on the economy is full of inconsistencies.
“Looking through the 2017 Annual Economic Report, it seems Government is now borrowing from other banks to pay the 15% upfront counterpart funding that China requires when it provides loans. Three Loans amounting to $145 million have been taken by GRZ in 2017 to pay for the 15% counterpart funding required by China and India for the following projects: Star Times ($41 million), Industrial and Commercial Bank of China for the Ndola Airport Project ($59.5 million) and for the recently launched Indian EXIM Bank financed Lusaka de-congestion project from Standard Chartered Bank at $44.9 million. This is ‘Borrowing upon borrowing or borrowing to borrow’.
Mr. Simumba charged that this is very irresponsible because the country is now borrowing on borrowing and further inflating the costs of principal loan repayment and interest servicing payments.
He said this is the reason annual debt servicing continues to increase and now stands at US$504 million in 2017.
“Our domestic revenue is being consumed by public service salaries estimated at 60% and debt servicing estimated at0 30% leaving only ten percent for investments. This is why Government is struggling to pay local suppliers and contractors and has built up arrears of US$1.3 billion. When will the Government have the courage to come out clean and engage local and international stakeholders so we can revise the Economic Recovery Plan and ensure we get our country and economy back on the path of growth?”
Mr. Simumba claimed that high level sources have revealed that Government is busy looking for another US$60 million loan to finish building toll plazas.
“Should we borrowing for such? So where is the revenue from the current tolls going if they have to borrow more money to finish building these toll gates? We need to put a stop to this continued borrowing without restraint. As Herbert Hoover once said “Blessed are the young for they shall inherit the national debt”.
And Mr. Simumba says the Ministry of Finance should stop being defensive about Zambia’s growing debt.
“The truth will very soon come out because we have to start repaying much of this debt at some stage. Debt service payments for 2017 were US$504 million alone. Total public debt is now just above US$14 billion ($8.7 billion external plus ZMW 50.9 billion domestic). If you include domestic arrears total debt rises to just above $15 billion. This translates to 60% of GDP based on a GDP of US$25 billion as stated in the latest Economic Report,” Mr. Simumba said. Continued...
Continued...
He added, “If independent analysts are wrong then give us the correct figures not preliminary figures please as is the case in the 2017 report. Citizens have every right to require transparent and verified Government data on our debts. That is why they are called public debts because it is the public that must repay these debts not individuals at the Ministry of Finance.”
Mr. Simumba wondered, “If Ministry of Finance itself four months into 2018 cannot produce comprehensive data on actual debt how then do they expect citizens to have this information? Why is the data preliminary four months into 2018? So if GRZ is issuing official debt data using preliminary figures where will we get the final debt figures that are verified and reconciled? It is clear Government needs to calm down and conduct a thorough review and audit of its public debts otherwise the questions will continue.”
“Second point the report states that 18 new loans were contracted in 2017 amounting to $1,750,849,448.15. What is scary and shocking is that out of this amount the Government borrowed from Israel alone $463 million for a “defence project”. Why is Zambian Government with the current problems the country is facing borrowing so much money for defence projects that have no economic return for the country. We should be borrowing to build economic and social infrastructure that would generate multiplier effects across the economy. Zambia is not at war to justify this level of borrowing for defence projects,” he said.
He further demanded that the Ministry of Finance to provide verified data on loan by Parastatals that are obtained using government guarantees.
“Could the Ministry also provide us with accurate figures for sovereign guarantees issued on behalf of SOE’s? Also how much is Zambia owing China for the 15% counterpart funding that is a key condition for release of funds from China EXIM Bank for supplier credits and for project finance. Could the Ministry also help citizens understand what the plan is for debt restructuring and renegotiation of terms?”
Mr. Simumba also observed that the Debt Management Strategy is very weak on this score and fails to provide specific strategies and actions that Government will take in this regard.
“As a citizen and an Economist I will continue to keep this Government accountable because I remember vividly the valiant sacrifice we made as Zambians to dismantle the $7 billion debt in the 90’s until 2005 when we reached HIPC Completion Point. We want straight answers not semantics,” he vowed.
Erratic allocations to Sinking Fund raise questions on Eurobond repayments – ZICA
By Chambwa Moonga on April 25, 2018
" A sinking fund is an account accumulated out of government’s revenue and invested for the purpose of repaying a long-term debt.
In 2012, Zambia contracted US$750 million Euro bond and issued another in 2014 amounting to US$1 billion.
The government again contracted US$1.25 billion Eurobond in 2015. "
Mwanakatwe explains usage of EurobondsBy Chambwa Moonga in Mongu on February 24, 2018
FINANCE minister Margaret Mwanakatwe on Thursday gave Parliament a breakdown in the utilisation of money from the three Euro bonds Zambia contracted in 2012, 2014 and 2015.
And Mwanakatwe says the government does not intend to default on repayments when the first, second and third Euro bonds fall due in 2022, 2024 and 2025 to 2027, respectively.
In 2012, the PF government contracted US $750 million Euro bond and issued another in 2014 amounting to US $1 billion.
The government again contracted a US $1.25 billion Eurobond in 2015.
'Volatility' = deflation of the currency vs other currencies.
About 2015: " Mwanakatwe, on the $1.25 billion Euro bond which the government issued in 2015, said: “Sir, it is important to mention that due to volatility in our domestic currency during that period, it was prudent to hold part of the money in dollars to reduce exchange losses when making payments in foreign dominated currency.” "
https://www.project-syndicate.org/commentary/imf-global-debt-database-findings-by-howard-davies-2018-06
"For the first time, IMF statisticians have compiled a comprehensive set of calculations of both public and private debt, country by country, constructing a time series stretching back to the end of World War II."
The IMF's Global Debt Database:
http://www.imf.org/external/datamapper/datasets/GDD
COMMENT - This demonstrates the failure of not only the IMF and neoliberalism, but of the fossil fuel model of energy. Solar doesn't depend on dams with bad generators or the inflation of the currency. - MrK
https://www.bloomberg.com/news/newsletters/2019-11-29/zambia-news-falling-kwacha-high-inflation-imperil-edgar-lungu
(BLOOMBERG) Next Africa: A Nation on the Brink
November 29, 2019, 11:45 AM GMT+1
Zambia’s ruling party is in a bind. It needs an International Monetary Fund bailout, but the austerity that would bring ahead of elections in 2021 may cost it power.
While President Edgar Lungu's party is putting its political considerations first, the economy is imploding. Inflation near 11% has been accelerating for eight months and is well above target. The kwacha is the world’s fourth-worst performing currency this year. Daily power cuts last 18 hours after a drought drained hydroelectric dams, and there's not enough money to import more energy.
The IMF issued a curt statement last week. Economic performance is likely to be the lowest in more than two decades and urgent budget adjustments are needed, it said.
“There isn’t a likelihood of an IMF program anytime soon. To me that implies the government is not willing to put forward the policy reforms needed to correct the fiscal path,” said Yvonne Mhango, a sub-Saharan Africa economist at Renaissance Capital. “It doesn't look like they will be able to pull themselves back from the brink.”
Lungu, who plans to contest the next election, says the government will manage its debt and "curb any further accumulation."
For some Zambians it's just like 2015 — a year of rampant inflation and drought. But it isn't.
Back then reserves were at a record $3.9 billion and the nation could spend more than $1 billion on fuel and electricity imports and supporting the currency. Now the coffers are empty.
It's a gamble that may not pay off. If the government runs out of money and defaults on its external debt, the resultant chaos may lose it the election anyway.
(LUSAKA TIMES) Broke: Zambia pushes to defer Eurobond interest payments for six months
September 22, 2020
Zambia has launched a vote with its Eurobond holders, proposing to defer interest payments on its three outstanding dollar-denominated bonds until April 14, 2021.
Zambia has $3 billion of Eurobonds outstanding and owes $2 billion to commercial banks, $2 billion to the International Monetary Fund and World Bank and another $3 billion to China.
The statement said Zambia had engaged with the IMF in recent months and was working in “close coordination” with the fund to establish strategies required to return its debt to a sustainable level.
“The proposal is intended as a first step to provide the issuer and its advisors the necessary breathing time to finalise the debt sustainability analysis and to define the parameters of a debt restructuring strategy aimed at putting the debt on a sustainable trajectory, which is a pre-condition to IMF lending,” the government said in a statement.
The country’s dollar bonds suffered sharp declines, with the 2022, 2024 and 2027 issues ZM082877959=, ZM105638671=, ZM126708157= all down nearly 3 cents in the dollar to trade around 53 cents in the dollar.
Zambia said it would conduct a call with investors on Sept. 29 to discuss the plan and set a deadline for the vote on its proposal set for October 16.
“The Ministry of Finance has announced a Consent Solicitation to holders of its (i) U.S.$750,000,000 5.375 per cent. Notes due 2022, (ii) U.S.$1,000,000,000 8.500 per cent. Notes due 2024 and (iii) U.S.$1,250,000,000 8.970 per cent. Notes due 2027 (the “Notes”) to request the suspension of debt service payments for a period of six months from 14 October 2020, effectively covering the upcoming three coupon payments due on 14 October 2020, 30 January 2021, and 20 March 2021 on the respective Notes.”
It added, “The Republic of Zambia is confronted with a very challenging macroeconomic and fiscal situation aggravated by the COVID-19 crisis that has severely affected the country’s public finances. A combination of declining revenues and increased unbudgeted costs caused by the COVID-19 pandemic have resulted in a material impact on the Government’s available resources to make timely payments on its indebtedness leading to increasing debt servicing difficulties.”
Continued...
It said this is the reason why the Republic of Zambia has taken the decision to apply for the G20 Debt Service Suspension Initiative in August 2020 and is requesting similar debt service suspension from its commercial creditors, including its noteholders.
It said it continues to actively engage with the IMF to secure financial assistance within a programme of reforms that would help in stabilising the macroeconomic outlook of the country and restoring its fiscal balance.
“In this context, the Government is committed to finding a consensual and collaborative resolution to the debt sustainability issues it is currently facing.”
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