WEEKLY POLICY ISSUE
We have warned before about the high cost of policy inconsistencies; the latest inconsistency – the imposition and subsequent reversal of the mining tax regime – will cost the country dearly.

The fiscal deficit for 2015 is now projected to be K13 billion higher than previously projected (the 2015 budget initially project a deficit of K8.5 billion, this has been revised upwards to K20 billion).

This is 44% of the 2015 budget and it is in excess of 10% of GDP! Had the PF Government consulted widely before imposing an unsustainable mining tax, the nation would not have found itself in this serious situation.

 

To plug this deficit, the borrowing-crazy PF Government will go back to the international capital markets with their begging bowl for another Eurobond. That is why they are proposing to raise the debt ceiling for external borrowing.

We hasten to point out that borrowing is in itself not a bad thing. It is the unplanned nature of the borrowing that will cost Zambians today and generations to come dearly.

A simple logic in borrowing is to ensure that the money borrowed is applied to future income generating projects whose projected cash-in-flows timing approximates with repayment timings.

A realistic analysis of domestic resources must be carried out to ensure that the servicing of the debts (interest payments) do not stifle economic activities in the country. We can safely conclude that this was not done.

Rather than put in place mechanisms to strengthen the economy which will result in enhanced domestic resource mobilisation, as any sensible government would do, this PF Government would rather borrow to meet consumption (which is nothing short of gluttony and recklessness).

The PF continues to borrow without due regard to the maximum borrowing limits that they have set for themselves. According to Statutory Instrument No. 116 of 2013 {The Loans and Guarantees (Maximum Amounts) Order, 2013}, the maximum amount of external borrowing is K35 billion.

This translates to a debt ceiling of about US$5 billion at the present exchange rates. With the current debt stock already in excess of US$4.8 billion, the PF has almost exhausted the allowable debt ceiling.

 

With the recent downgrading of Zambia’s sovereign credit rating outlook by Moody’s, future borrowings by Zambia will come at a higher cost. It will be folly for the PF Government to borrow commercially as the debt is likely to be more expensive than before.

Already, the PF Government’s insatiable appetite for borrowing has tremendously increased the debt servicing costs. The so-called pro-poor Government spends more on servicing debt than it does on social protection for the vulnerable citizens.

In 2015, Government planned to spend K2.4 billion on external debt interest payments (before we factor in the increase in debt volumes arising out of borrowing to finance the deficit and increased costs of debt) compared to K1.3 billion on social protection.

The matter of debt is beyond partisan politics as it will affect us, our children and their children’s children.

 

Policy Options

We in the UPND call upon all Members of Parliament, regardless of their political affiliation, to offer proper and effective oversight over debt contraction.

We implore all parliamentarians as direct representatives our people to reign in this PF Government to prevent them from further borrowing which threatens to plunge the country into the yoke of excessive debt and poverty.
We in the UPND will prioritise expansion of the economy so as to increase domestic resource mobilization, instituting full tax reforms and ensuring that the capacity of the Zambia Revenue Authority to collect taxes is enhanced.

We will institute measure to ensure equitable and sustainable tax regimes in all sectors of our economy.
Once in government in 2016, we will institute measures to enhance the capacity of the Budget Office in the Ministry of Finance to be able to make realistic budget forecasts.

The consistent missing of budget targets cannot go on unabated and are costing this country dearly.

We will also allow our able economists to do their work without any political interference.
This policy position aims at addressing the immediate actions that the PF needs to take, in the coming weeks, I will dwell on this subject just to ensure that we fully understand what the Government is doing to this country is at the expense of the current and future generations.

Hakainde Hichilema,
UPND President

“Together, We Can”