After months of denial about the gravity of Zambia’s debt situation, the PF Government’s self-inflicted fiscal decay has fully manifested, as Zambia fails to pay US$1.4 million interest to the African Development Bank (AfDB). AfDB has thus cut any financial disbursements to Zambia for failing to repay contracted loans on time. Zambia joins the AfDB blacklist of Zimbabwe, Somalia and Sudan (all fragile States).
The AfDB action means that Zambia has defaulted. And this is not the only default in recent months, a few weeks ago Zambia defaulted on a small amount to an Italian Bank (Euro 6.2 million) that purchased the Presidential jet. This was despite Bwalya Ng’andu giving assurance in August that Zambia will not default on debt servicing. This default will be blamed on UPND and HH, the latter having connived with AfDB.
PF should do the following:-
1). It can slow down on borrowing by reducing deficit for 2020 from 5.5% to 3.4% of GDP. You cannot dig yourself out of a hole by digging more.
2). PF can slow down on spending, by cutting back on unnecessary or low priority capital projects such new roads, new districts, ministries, commissions, new universities and so on.
3). Improve the quality of public spending, focusing on sponsoring commercially viable public-private partnership projects that will help improve productivity and bring more money into the Treasury through tax contributions.
A few weeks ago, I shared this graphic on how Zambia is now stressed to service debt, which I share again today. The Eurobonds are due in January (US$112.1m); March (US$40.3m) and April (US$85m). If Ng’andu does not take the measures above, Civil servants must forget about their salaries.
We have spoken, if they have ears, they will hear.