Debt Restructuring Sugar Coated

Development analyst Charity Musamba has noted with great concern that both political and policy leads have failed to come down and explain to the people in simple knowledgeable ways of making them understand what debt restructuring is really about. Musamba said the whole topic has been kept very technical and in a lot of ways has been kept urbanized, and that leaders are more dangerously not providing the political, governance, and economic aspects of debt restructuring.

On 22 June, the Zambian government confirmed that its official creditors decided on a deal to restructure $6.3 billion in loans. It was agreed to introduce a three-year grace period during which only interest payments are due and to lengthen maturities to over 20 years.

Speaking in an exclusive interview with the Zambian Business Times –ZBT, Musamba however said people have unfortunately been misled at the political level. “We are talking about debt restructuring as though the ultimate end is debt relief or debt forgiveness. Debt relief and debt forgiveness were more obvious for the other debt crisis that we had in the 1990s,” said Musamba. She said debt restructuring means Zambia has reached a stage where it did not even know in exact figures what its debt was, who was being owed, how much, when, and how much is supposed to be paid back.

She said this meant that the country’s accounts on loans and debts were in a shoddy state thereby making it difficult for creditors such as the institutions and governments that lend money, and Zambia as the debtor to always work in a confident manner. ‘So restructuring means cleaning up this mess I am talking about, and it is not obvious that when you clean it you will have debt relief. It is another process based on the outcome of the restructuring that you now start negotiating whether some creditors will postpone payment, whether others will forgive your debt, or whether others will maintain” noted Musamba.

She noted that restructuring simply means putting the house in order and that the leaders have failed to explain to the people, but have instead sugar-courted the whole process making people believe that there will be resources available. Musamba said the restructuring process will determine the final consequences of where Zambia will be.

 Musamba did note that the process is taking a long because the nature of the debt crisis Zambia is facing today is very different from the one experienced in the 90s. She said the biggest difference is that a large proportion of Zambia’s indebtedness are commercial loans and private loans noting that it is easier to restructure government to government loans or international financial institution loans. “If you look at the breakdown of our debt, we owe quite a lot to commercial and private institutions. Those have their own ways of restructuring, for instance, we have the Euro Bonds; the Euro bonds are a form of loans that are given out based on the pension schemes of other countries. So when you are restructuring Euro bonds, you will not restructure them the way you would restructure loans from IMF World Bank” said Musamba.

She said the process is taking long because of the huge debt, and secondly, the nature of the debt requires speaking to specific different creditors. She notes that each one of them will have its own expectations, motives, and vested interests. Musamba however noted that Zambia does not seem to have adequate capacities for negotiators. She said alongside this system is an effort to build the capacities of the country’s negotiators to participate in the system more effectively. She said this must be taken as a learning lesson, especially for a country that has spent a lot of money training technocrats to manage debt. “For the last 15 years, we have been sending people to Washington under IMF, World Bank to go and learn how to manage public debt, when we go to the Ministry of finance it is one of the biggest departments. My question is why are we failing to perform? We need to answer this question because if we will be spending people’s tax payer’s money to train people to do this work, and we still have to go out to look for external expatriates to come and help us do this work, then there is a problem” said Musammba.

She noted that even the Debt Sustainability and Analysis by the IMF the Ministry of Finance the country always has to hire or depend on external expertise. She said it is time that Zambia took charge of these processes, noting that a debtor cannot depend on a creditor to determine how much is being owed.

Development analyst Charity Musamba has noted with

Kwacha instability affecting inflation

A Financial Analyst has attributed the continued increase in inflation to the Kwacha instability which he says has potential to cause damage to the economy.

The Analyst has charged that the instability of the kwacha has also the potential to hinder the 6 – 8 inflation rate percentage target by the end of 2024 if no serious intervention measures are put in place.

Speaking in an exclusive interview with the Zambian Business Times – ZBT- Financial Analyst Bright Chizonde said the current about 11 percent (10.8 percent) as of August 2023 is a result of the instability in Kwacha.

According to official statistics obtained by the Zambian Business Times, the inflation rate has hit 11 percent as of August 2023.

The 10.8 percentage is however 2.8 percentage points above the top limit of the central Bank’s 6%-8% target range.

Chizonde noted that this is because of the volatility of the exchange rate being faced currently. “So if the kwacha continues to behave the way it has been behaving, the pass on effect or pass-through effect from the depreciation of the kwacha or the movement of the kwacha to the inflation will continue to a problem.”

He said there will be continuous pressure on the kwacha and that it is about how the kwacha will be managed that will determine whether inflation can be kept at the projected 6 to 8 percent. He noted that the country had a debt restructuring issue which is still in the process and once fully resolved there will be an expectation of the kwacha to be a bit more stable.

Meanwhile Chizonde said it is also important to note that the objective to reduce inflation is in the opposite direction with that of growth as there is a trade between inflation and economic growth prospect, so if the economy is squeezed so much and money supply is reduced, there will not be sufficient liquidity for the economy to grow.

A Financial Analyst has attributed the continued

Western Province Chamber explains high inflation

According to the June 2023 report by the Zambia Statistics Agency ZAMSTATS, Western province placed second only to Eastern as the province with the highest inflation rate across the country.

The Western Province Chamber of Commerce and Industry attributed this to a number of factors such as transport costs and bad road network, lack of industries, lack of drugs, and low agricultural produce among others.

Speaking in an exclusive interview with the Zambian Business Times –ZBT, Chamber Vice President Samuel Litebele said many of the business transactions done in the province are by the small business enterprises that deal in vegetables, rice, timber, fish, and trading, and that the only other people who bring in money apart from them are the public workers.

Litebele disclosed that most of the commodities and foods are obtained from either North Western Kasempa, Mumbwa, and also from Lusaka. He said that commodities that come from Lusaka are what the traders buy which include hardware, detergents, and clothes.

Litebele said that most of the food comes from Mumbwa which includes maize, vegetables like cabbage and tomatoes, beans, and Kapenta. He said that because such commodities are coming from elsewhere, transport costs are high.

He said one of the other contributing factors is the road network. He said the road network is very bad that by the time the goods reach here they will be very expensive” He also mentioned that the province does not have a good number of industries like other provinces such as North Western Which has mines, and Central as well Southern provinces which have industries that can get a lot of people money.

Litebele further attributed this to the lack of drugs in hospitals which subjects people to buy them from other sources. He said there is an increase in drug prices due to their unavailability in hospitals.

 Litebele said in addition to the depreciation of the kwacha, other contributing factors are low agricultural produce, increased maize prices which upscale the price of mealie meal, and an increase in electricity.

He disclosed that a 25-kilogram bag of mealie meal in the province is going at k150 to k290 breakfast, and k150 to k260 roller. He said the province only has two milling plants which are Country Millers and APG. He did however mention that they do receive mealie meals from outside the province mostly from Lusaka which is slightly cheaper depending on where the maize is bought ranging from k270 to k280. He said that not enough maize is produced in the Western province and the maize used by the local millers comes from either Kasempa, Kalumwange, or Mumbwa and Lusaka.

Litebele noted that if inflation is high, one of the effects is a loss in purchasing power and high-interest rates among others. “To our consumers, our appeal to them is that they should get involved in growing of these foods that we get from outside for example vegetables, grains, maize, and also rice because that will enable us to have these foods here,” said Litebele.

Litebele has also appealed to the government to reduce the cost of capital as it is one of the major problems hindering people from getting more into business. “Everything, water, Land, people are around, all the parts of production are available, but capital is very expensive, especially from the banks,” said Litebele.

He said the rates are more than 25% which is too high and cannot help the people to grow. Litebele also proposed that allocations to the Constituency Development Fund CDF and to the Citizens Economic Empowerment Commission CEEC be increased. He said currently the CDF stands at 5 percent and CEEC IS stands at 8 percent which is not enough to cater to the many projects that need financing in the province. He said this is the money that can assist the small-scale business personnel in the province to grow so that even when there is inflation, they will be able to trod and catch up.

According to the June 2023 report by