Editor's Comment

Zambia needs bailout

IT IS not rocket science that COVID-19 has adversely affected the ability of developing countries to service debt obligations.  Zambia is among them.
Zambia, like many other developing countries, relies significantly on grants and loans to push its development agenda.
This is because the resource basket is far inadequate to finance capital projects such as infrastructure building.
When the Patriotic Front (PF) formed government in 2011, it immediately embarked on massive infrastructure development, a catalyst for further social and economic growth.
Government has had to borrow to finance the construction of roads, schools and hospitals, among other key infrastructures.  The benefits of these investments are gradually emerging.  This, however, came at a huge cost, which has contributed to the external debt stock of US$11.2 billion.
Zambia put in place a realistic repayment plan, but this has now been scuttled by the devastating impact of COVID-19.  The economy has been hit hard and it has become practically impossible for the country to service its debt.
Zambia’s economy, like those of many other countries including the developed ones, has been thrown into disarray.
It is a known fact that the pandemic has led to closure of many businesses and laying off of workers.
This has deprived Government of the much-needed revenue through lost taxes from companies and employees.
The budget too has been adversely affected as the projected income is not coming in as expected. Fund allocations to sectors have been reduced to a trickle, if not discontinued all together.
It is for this reason that Government has decided to amend and adjust downwards the 2020 national budget worth K126 billion.
The amendment is aimed at aligning expenditure with available resources as well as prioritising more needy areas such as the Ministry of Health in view of the pandemic.
As the situation stands right now, the resource basket is inadequate to meet the numerous needs the country is faced with.
For instance, a lot of people have lost jobs and are in need of a social fund, but Government’s hands are tied due to lack of finances.
This is the case with many other developing countries who already had fragile economies even before COVID-19. The pandemic has worsened the situation.
Given the economic state Zambia is in, due to the devastating effects of COVID-19, it is unrealistic for lenders to expect the country to fulfil its debt obligations.
It is like asking for water from a rock. Government is also aware that there is no amount of ingenuity that can be applied to pay its huge debt obligation without totally collapsing the government system.
This is why Government has written to its lenders to cancel or re-structure loans to help the country sustain its debt.
Minister of Finance Bwalya Ng’andu says letters negotiating with lenders were sent three months ago, with some lenders responding while other responses are still being awaited.
We expect all lenders to be considerate and respond favourably by giving Zambia flexible terms of paying back debt. The lenders will also do well to consider writing off some debts where possible.
We expect the external lenders to be humane and devise more flexible payment terms to avoid strangling already stressed economies.
Moreover, the essence of lending is to help less privileged countries develop.
It is in such times that lenders should help developing countries out of the doldrums of poverty.  Their will to help the needy is under test.
It is commendable that the International Monetary Fund (IMF) has shown the way by providing service relief to 25 member countries under the IMF’s revamped Catastrophe Containment and Relief Trust (CCRT) as part of the Fund’s response to help address the impact of the COVID-19 pandemic.
IMF has provided grants to its poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months.
This is aimed at helping these countries channel more of their scarce financial resources towards vital emergency medical and other relief efforts. Among the 25 beneficiaries are Malawi, Mali, Mozambique, Niger, and Rwanda.
Zambia cannot benefit because it has no standing debt with IMF, but this is the kind of gesture that other lenders are being asked to emulate.

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