Many People Have Had Reservations Over My Confidence About Zambia’s Ability To Amortise Its Debt Both In The Short Run And Long Run. – Dr Lubinda Haabazoka
Well, there are two types of debt we have:
- Eurobond debt and other capital and money market debt
- Contractor project financing debt
The debt that poses a challenge is debt acquired on the capital and money markets (Eurobonds inclusive). However, on this debt, our ability to make coupon payments, interest payments and principal payments is solid. The resent austerity measures and cut down on new debt has even unlocked more resources to ensure that even local contractors start receiving what’s due to them. Stability in terms of salary payments for civil service and quasi-government institutions has also shown that the situation has been stabilised and cash flow forecasting has contributed to ensuring that there are very few liquidity gaps. The process is similar to what happens in the ALCO in banks.
On contractor debt, much of this came from China and other cooperating partners. Now what we need to understand is that China sees the world economy different from how the rest of us see it. Economics in China has both a capitalist and a human face. Even though Eurobonds pose more of a threat, propaganda has been bashing China. What most people low is that China has a huge population that needs jobs, housing and other things. To feed 1 billion people is no joke. So for China to sustain its economy, it forces other countries to be dynamic when it comes to economic growth equally. China needs to sell to Europe and the USA, so for these two to afford, China should produce cheaply. For China to provide, it needs raw materials from Africa. However, to move raw materials, Africa needs better roads, better railway infrastructure, better hospitals for a healthy population so that citizens remain fit to help produce raw materials. In serving its interests, China is also serving the interests of African countries. Remember Adam Smith’s invisible hand?
However, the problem is that Africans have not understood how to turn this to their favour. In most cases, Chinese PPPs are considered as grabbing of African property. China owns ports in Europe, and no one talks about it but one port acquired in Sri Lanka has caused havoc.
The other thing is that no matter what we do, there should be a balance of power in Africa. We also need to encourage European and American investments into Africa. This will ensure the flow of resources for all corners of the world.
Back to debt. China knows that if African countries defaulted on its debt, no other country would support its economic policy and everyone will turn to the IMF for money that never comes into the economy. The recent debt cancellations from China are the start of new debt restructuring programs across Africa. Africa should sleep tight.
For Zambia, the advantage is that we stopped acquiring massive loans in 2017. Meaning that debt rise has significantly reduced, and within ten years, the Eurobond headache will be dealt with.
I also suspect that a clique of investors have been withholding money into Zambia, but the thing with economics is that when one leaves a gap, others fill it. There are a lot of new interventions from Europe and USA in Zambia by the private sector that plans, for example, to bring in billions of dollars into Zambia’s energy sector without Lampung that debt on Zambia or Zesco. There is a group of farmers from abroad that want to permanently set up base in Zambia to create employment and also growth for the international market to enhance forex inflows. Many people are coming into Zambia looking at manganese, copper and cobalt to prepare for the future of electric vehicles.
So fellow Zambians don’t be disillusioned with problems created in newspapers. Let’s go and get our fair share. Get land, find investors to invest alongside you and become instant millionaires.