" THE DEBT POLICY REMARKS IN THE BUDGET PRESENTATION ARE WORRING" SAYS JCTR
12 February 2009
“The Minister of Finance and National Planning, Hon. Dr. Situmbeko Musokotwane’s picture of the debt policy in this year’s budget presentation remains porous and lacking in concrete commitment of a legal debt framework”, says Privilege Haang’andu, Programme Officer for Debt at the Jesuit Centre for Theological Reflection (JCTR). “In the first place, the Minister only mentions that domestic borrowing will increase by 0.4% this year. We know that last year K170.6 billion was set aside for external debt servicing and K233 billion actually expended in the exercise reflecting a supplementary expenditure of K63 billion”, observes Haang’andu. “Similarly in 2007 the Government set aside K129.3 billion for external debt repayment but actually paid out a total of K244.8 billion with a supplementary budget of K115.5 billion over and above what was initially planned.”
These irregularities are a clear sign that Zambia needs to put in place a debt management framework that clearly sets the needs for loan contraction and the benchmarks for debt servicing.
Secondly, the increase in the allocations in this year’s budget from K170.6 billion in 2008 to K372 billion in 2009 for external debt servicing and from K650.7 billion in 2008 to K978.7 billion in 2009 for domestic debt servicing is an audible warning that Zambia needs to put in place an institutional framework to guide its patterns of borrowing and improve record keeping.
We at JCTR are concerned that the Minister gives no idea of how much Government plans to borrow in 2009 in terms of foreign loans other than the US$ 132 million in debt contracted in 2008 alone. It is crucial for Zambia to be able to set ceilings of how much it can borrow in a given financial year as opposed to leaving things as open as put in the Minister’s address. What the Minister presents us with are merely Government’s plans to prefer concessional loans over non-concessional ones, instead of a solid assurance that the Government will put in place a systemic framework such as a debt management office to avoid dangers of Zambia falling into a debt trap. What reflects in the Minister’s address as “Foreign Debt Policy” is, rather than being a clear picture of what policies Government will put in place to guide the process of borrowing, a statement on Government’s plans to continue borrowing. It is of paramount significance to note that the current looming credit crunch is going to exert more pressure on Government to source funding from outside, hence the urgent need for a solid debt policy.
“Without a consultative and transparent guideline directing the processes of loan contraction and procurement of foreign resources”, Haang’andu advises, “Zambia can lest be assured to be headed for yet another debt burden and the pre-HIPC predicament”. He further observes that if governments that already have proper strategic debt policies like Nigeria are getting shaky in their fiscal controls due to the credit crunch, countries like Zambia that have no proper guidelines for loan contraction and have less shock absorption for occurrences like the current one would be more susceptible to uncertainties. For this reason, Haang’andu adds, “JCTR continues to urge Government to treat the matter of putting in place a debt policy as a matter of urgency”.
|
