Green Party alarmed by ballooning external debt

Filed under: Statements |

Peter-Sinkamba-churchThe opposition Green Party says it is extremely alarmed by Zambia’s sky-rocketing external public and private debt stock since 2011.

Green Party President Peter Sinkamba said the most unfortunate situation is that the public is kept in the dark on the total debt stock for the country.

Mr Sinkamba said in the interest of transparency, accountability and good governance, the Green Party demands that Finance Minister Felix Mutati makes a full disclosure of the current status of the external public and private debt stock as well as the domestic public debt.

He said the party is also demanding that the public disclosure be made on quarterly basis.

“Three days ago, Finance Minister signed confirmation agreement of a $246 million credit facility with Export- Import Bank of India (EXIM). Meantime, government is in the process of acquiring a $1.6 billion loan from the IMF. Several other loans have been contracted in the recent months,” Mr Sinkamba said.

“When Alexander Chikwanda was Minister of Finance, he had an open door policy on the fiscus issues. He used to publish quarterly bulletins in public media of expenditure and other information. This made it easier for the public to track budget expenditure and conduct debt sustainability analyses on regular basis.”

He added, “We are aware that at the end of 2014, Zambia’s stock of external public and private debt stood at $6.9 billion or 24 percent of GDP compared to $3.6 billion or 15 percent in 2011. We are also aware that the domestic public debt increased from $2.8 billion or 12 percent of GDP in 2011 to $3.8 billion or 17 percent of GDP in 2014.”

Mr Sinkamba said, “After issuing separate sovereign bonds in September 2012, April 2014, and July 2015, the country’s public debt to international investors significantly increased by about $7 billion, through Eurobonds alone.”

“Meantime, government has since 2014 borrowed more funds from private banks and other investors. It has been very difficult to track government these loans, especially from China, Middle East and other Eastern Asian States. It’s hard to know how much the country owes other external debtors, besides Eurobond debtors, since the public is not given updates.”

Mr Sinkamba said the Green Party is extremely worried because the share of central government’s debt from multilaterals has fallen sharply since 2012, while the share owed to private banks and investors has increased.

“Further, though inflation has reduced from 22 percent to 6-7 percent, we are worried that the fiscal deficit is on the increase and may reach as high as 20 percent, if stalled infrastructure projects countrywide have to be financed this year or next. We foresee a situation where government may be tempted to borrow more from private banks and investors,” he said.

“Though easier to obtain, such funds tend to be more risky to the nation than multilateral loans because of potential of the loans being acquired by vulture funds. It is in this regard that we find it imperative for the Finance Minister to make quarterly full public disclosure of the debt stock so that the public not only keeps track of the fiscus but also becomes aware of the bottom line of national balance sheet as well as potential risks at play.”

He added, “After all, government is managing the funds on behalf of the public. So, the public must be in the know.”