By Patson Chilemba
Kamfinsa member of parliament (PF) Christopher Kang’ombe says the huge debt accumulated under the PF administration could have been lower with more public scrutiny, despite defending the spending on infrastructure projects.
And Infrastructure minister Charles Milupi said it has been very difficult to account for the huge borrowing under the previous PF administration, and remains hopeful that new mechanisms to regulate that will bear fruit.
Former Republican vice-president Dr Guy Scott’s wife, Dr Charlotte, said in her very brief remarks that “transparency in contracting debts is really necessary.”
Meanwhile, a prominent Professor who indicated that they were uncomfortable to be mentioned observed that the clause giving the President power to acquire loans when parliament is dissolved and during a state of emergency was prone to abuse by the Head of State.
Kang’ombe was asked if he felt the country could have been spared the huge debts if the law requiring parliamentary oversight had been enacted much earlier during the PF reign. Responding, Kang’ombe said because of the huge borrowing the country was now exporting power such that even Zesco was repaying its loans through the same energy surplus.
He said even investors wanting to invest in industries would want to know how stable the power supply was within the country, saying given the huge infrastructural gap in the country “most likely, the borrowing was going to take place but maybe public scrutiny on which loans we should have started with would have taken place. I think there would have been a public conversation around which loan we start with and which one we don’t start with.”
He said borrowing will continue, as the new government itself has borrowed.
Put to him that when the PF was coming into office the debt threshold was below $3billion but the figure rose to over $14 billion foreign debt during the PF reign, which has heavily contributed towards the huge challenges the country is grappling with, Kang’ombe said he does not know the debt levels the country would have been at with parliamentary oversight on loans “but we would have still, borrowed” as the needs would have dictated borrowing, but “the question may be is the figure”
“The question may be is instead of $14 billion, would we be sitting maybe on $12 billion or would we be sitting at $10 billion?” Kang’ombe said, insisting that Zambia has an infrastructural gap. “The question now would be can we pick which ones are priority. You people who stay in the capital city you have travelled countries and you are telling yourselves Lusaka should look better. Now how does it look better without putting money in infrastructure? So maybe the conversation is we could have not reached maybe $14 billion we could have staggered the loans, maybe we could have done $10 billion. But I can bet that money would have still been borrowed even with the law in place but with more public scrutiny on priority loans.”
He said even with the huge demands on safe drinking water, the country would not have been able to generate its own revenue without borrowing, saying when you justify that the sector is essential, borrowing is unavoidable.
Asked if it would be justifiable for the UPND to borrow the same amounts or beyond if they were to also reign for 10 years as long as what they have borrowed the money for has been seen by the public, Kang’ombe said if the UPND intends to borrow, they would not borrow for the same roads done under the PF, nor borrow to give the country modern airports and borrow $500 million for the Kafulafuta water project, arguing that they will probably just need $10 million to finish it.
“They will not borrow as much because much of the infrastructure projects are already in motion what remains is just to finish them. If the minister of Infrastructure and minister of Finance came to parliament today and said PF we need you to support the borrowing of the following amounts and then they link it to projects that have to finish, I will be the first to support them because they will be able to borrow to complete projects that will benefit the Zambians,” Kang’ombe said. “…Already the UPND is looking for money to build schools. World Bank says we can give you so much money. Those are things that if they bring to parliament Christopher Kang’ombe will be able to say how many more schools do we need to build and how do we stagger them? Because I was not in parliament in the last five years, I am privileged now to be in parliament and there is a law which is saying I have a role to play. I will be able to interrogate with my colleagues which loans will be priorities to complete the projects.”
Kang’ombe explained that the the Public Debt Management Bill 2022 was a constitutional matter in the sense that in 2016 the Republican constitution was amended, introducing the requirement that before money was borrowed, parliamentary authority should be sought first.
“Previously, it used to sit in the Loans and Authorisation Act of 1969, an old law. Now the Loans and Authorisation Act did not have details that would make it a constitutional matter. So that meant government would easily make a decision in cabinet and borrow money. That is under the old Law which they are calling Loans and Authorisation Act,” Kang’ombe said. “So when the constitution was amended in 2016, an article was introduced, now after the article was introduced it means that everything else, all the laws that we were dealing with that matter had to either be repealed or amended as well so that everything is in line with the constitution. So for the last couple of years, consultations have taken place, accountants, learning best practices in other countries and finally a bill was brought to parliament. The first thing that the bill intends to do is to establish a Debt Management office.”
Kang’ombe said the Debt Management office would act as an administrative office to manage what should be achieved in the constitution.
He observed that the bill was speaking to what Zambians recommended to enable that the public was aware of what the government was doing and to give comments on what should be borrowed and for what purpose.
Kang’ombe observes that the bill is responding to the constitutional requirements, adding that every year there would be a document before parliament which will be called the borrowing plan, where at the time the minister would be going to parliament to present the national budget, the minister would also present a borrowing plan indicating how much the government planned to borrow the following year for parliament to have a say and final decision.
“This is a very progressive bill. Even when it came for first reading at parliament I think we supported it because we all recognize I think on both sides of parliament that anything good for the public deserves public support. And we are the representatives of the members of the public, which MP would stand up and say we don’t support this bill? It’s a good bill because it’s giving us authority to regulate how government manages debt. So it’s a good thing. Yah!” Kang’ombe said.
But asked on the observations by former Bank of Zambia (BoZ) Governor Dr Caleb Fundanga that the bill was commendable but it will not completely diagnose the problem of over-borrowing as ruling parties always found a way to push through their wishes even with parliamentary oversight, Kang’ombe said the fact that any loan has to be approved through parliament meant that the matter had already become a public discussion, and therefore if any government wanted to over-borrow, the public will have their eye on the matter.
He highlighted the role of the media and civil society in public finance management.
“If any government wants to, for lack of a better term, over-borrow, they will not do it, if they push that agenda the public will have their eye on the discussion in parliament. You know the advantage with a public discussion, is that if $10 million has to be borrowed and a matter comes to parliament, you the media will pick it first of all. Secondly, civil society will pick it, thirdly members of the public will pick it,” Kang’ombe said. “Borrowing in itself is not a bad thing. Today we are now exporting power into Zimbabwe, I believe it should be Namibia or South Africa that is buying our power, because we have got excess power. Could we have gotten that excess power if we had not borrowed money to put into the energy sector? The answer is no.”
He said the numbers in parliament will always be with the ruling party but the advantage with the law was that the public will know the conversation taking place in parliament, saying there will actually be a committee on delegated legislation and budget that will receive submissions from the public.
“The power to borrow money is now in parliament. Now parliament has got its own politics, has got its own challenges, but the principle is that by law, the constitution says you need authority from parliament and this law is what we should structure. Should we do two-thirds, should we do simple majority? That is what we will discuss when we open parliament next month,” Kang’ombe said.
Kang’ombe also gave his opinion on the debt ceiling under the proposed act and the maximum amount of guarantees that shall only apply after five years of the commencement of the act, saying his understanding was that when a new act were introduced, there must be a guide as to which transactions get affected by that new law, as when a new law was introduced it could not apply to transactions that have already taken place.
“What they are putting in place, basically in my view are things that should allow for government to manage old loans, but also the idea that it should take five years before some things are applicable should not be allowed. When you introduce a law, a law should apply moving forward. The law should not apply backwards, so if for instance President Hichilema signed this into law on the 10th of September as an example, it means that any new loan should come to parliament,” Kang’ombe said. “Things to do with what ratio to GDP, they are standard. I remember at some point we were told no borrowing should exceed 40 percent of the GDP, meaning all the loans even if we borrow 15 times, so long as it’s below 40 percent of GDP then we are okay. I remember that was the conversation some three, four years ago.”
On the 65 percent borrowing threshold to GDP, he said that meant that the GDP should equally grow, saying the 65 percent threshold was in fact too high and must be moderated downwards.
But Milupi said the country was in recession with a huge debt mountain at the time the UPND was coming into office, arguing that because creditors have noticed that they were dealing with credible people now hence the $1.4 billion staff level agreement with the IMF.
He said this month the administration would be concluding discussions with IMF and all the creditors to see if some of the debt could be rescheduled, forgiven and at a later stage, some of that debt would be financed at no interest rate, against the Eurobonds-acquired under the PF administration which he likened to “Katondo street.”
Milupi said he was in charge of infrastructure and the PF administration were boasting that they had recorded massive infrastructural progress during their time but “even in their so-called strongholds” they achieved little, citing Eastern Province where he said the only road done was from Luangwa to Mwami border post saying and that It was not done from the money borrowed but came in as a gift from the European Union (EU).
But he said nothing was done on the Chipata-Vubwi, Chipata-Chadiza, Chipata-Lundazi, Lundazi-Chama, Chipata-Mambwe, and in Muchinga Province, the main great North road from Serenje-Mpika, Mpika-Chinsali-Isoka-Nakonde was a disaster, including Isoka-Mafinga-Muyombe and the one done from Nakonde to Mbala was failing.
He said in Northern Province the road from Mpika to Kasama was terrible, and that there was nothing to show for the over $112 million spent on the Kasama university including the FTJ university in Luapula and that in that province people were shouting to him “road, road” when the Vice-President visited the area.
He said there was nothing to show on the money given to Zamtel and Zambia Railways, saying as a result a law has been put in place to control debt contraction as no administration will borrow without parliamentary approval.
“So the question is where did the money that borrowed go to? So as a result of that we have introduced an act in parliament which we approved on the last Friday to ensure that there is control on the way this country contracts debt. No single person, a minister, or even cabinet can now borrow without seeking the authority of parliament,” said Milupi. “And That authority there will be what are we borrowing, what are the conditions, what are we going to use the money on and what is that money going to do to the economy for example? Is it going to grow the economy? How are we going to pay it back? Simple, straight forward questions. There will be proper oversight of parliament on what happens in the executive. We have strengthened the Act…so it brings fiscal discipline. When they were borrowing the Eurobond we said it in 2012, you can’t borrow commercial money. The $750 million Eurobond, the first one in 2012 the interest was was high, the normal concessionary interest rate would have been below .5 percent.”
He said with the defaulting, the yield rates have gone up on the Eurobonds gotten under PF to 22 percent and that was why the country is chocking.
But a prominent Professor who said their views must be quoted but not their name due their standing with the government said the bill was well intended, but were uncomfortable with some of the clauses.
“Clause which gives the President powers to contract a debt when the National Assembly is dissolved. This power can be abused when the National Assembly is dissolved. During this short period, there should be no contraction of loans. Let’s avoid the same old practice of investing too much authority in the Presidency. When Parliament is dissolved, there are no Cabinet Ministers to consult. Cabinet is also dissolved,” said the Professor. “Clause which gives the President powers to solely contract a loan when there is a state of emergency or a state of war. Surely, an emergency meeting of the National Assembly can be convened to discuss and agree to contract a loan under these circumstances. I feel that it’s very easy for the Presidency to abuse his/ her powers when there is a state of confusion and panic such as a war. We should have checks and balances by the National Assembly at all times.”
This story has been developed following a training and mentorship programme under the Strengthening Accountability Networks Among Civil Society (SANCUS) project by Transparency International Zambia with the support of the European Union.
